Issue 28 – The Upward March To Normal

As expected, the U.S. monetary authorities delivered their third straight supersized interest rate increase, raising the cost of money by 0.75% to 3.125% in a further effort to reduce the Fed’s balance sheet. What surprised the market however, was their forward guidance, which projected that the policy rate could rise another 125 bps this year and end around 4.675% in early 2023. The bottom line is the prospect that interest rates will now go and stay higher than previously anticipated, guaranteeing that the dollar will remain strong, the yield will remain inverted and the policy rate will hold out above the so-called neutral rate. Consequently, the pace of U.S. money supply will surely decline further and farther and by extension reduce the dollar value of the world supply of money.


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By Hubert Marleau

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By Hubert Marleau

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