These days the American Central Bank, the Federal Reserve, has been overwhelmed by a scandal of rare intensity.
Three members of his board were accused of doing Insider Trading. Apparently Vice President Clarida and two other members of the Federal Reserve board would have traded in advance on the public communications of the Federal Reserve thus benefiting from confidential information for their benefit. This scandal is shaking the American Central Bank but what matters most to the markets and that has changed the balance within the board. So if before there was a certain balance between hawks and doves, now the balance has shifted decisively in favor of doves. Let’s see what that means for the markets. Doves have always been extremely reluctant to taper. Inflation was a transitory marginal problem for them and the only thing that mattered was not to disturb the stock exchanges and not to frighten them.
A positive shift for the stock exchanges
Up to now they have had a certain counterweight from the hawks who instead pushed for tapering. Every utterance of characters like Bullard or others made the stock exchanges tremble because it gave the impression that the Federal Reserve was about to tighten the purse strings. Powell has always kept the markets pretty calm by talking about a long-term or very long-term tapering. Now that the hawks within the Federal Reserve are in a clearly minority position, it is easy to imagine that the markets, despite the serious threats on the horizon, are feeling more serene.
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In fact, tapering today is certainly less likely to be incisive.
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Sure, inflation, the Evergrande scandal and the problems of supply of raw materials are not a trivial matter. However, after this earthquake the Fed certainly appears much more friendly towards the markets.
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