Powell At the Bargaining Stage, OPEC+, Inflation in the USA

15 juil. 2021

The US inflationary data another piece showed that the situation continues to deteriorate rapidly. Manufacturing inflation showed the highest value in the entire history of observations. Naturally, after that, everyone listened with double attention to the speech of the head of the Fed, Jerome Powell, in Congress. Recall, before that, he was at the stage of deep denial, arguing that the current inflation in the United States is a statistical anomaly and a temporary outburst of data.

Judging by his yesterday's comments, the stage of denial is beginning to move to the stage of bargaining. On the one hand, the head of the FRS continues to argue that inflation in the United States is an extremely temporary phenomenon. On the other hand, Powell said that inflation is not moderate, but well above 2%. That is, it recognizes the fact of inflationary pressures.

But in the end, we'd still slip to the old mantra, what else needs to be seen, that this is a temporary shock, etc. One of his remarks about timing was interesting - he said a phrase about the six months that need to be monitored for inflation.

Well, the more interesting it will be to find out the opinion of other FOMC Fed members, which they will voice in a couple of weeks at the next meeting of the Committee on Open Market Operations.

In general, despite the continuation of the "dovish" rhetoric on the part of the head of the Fed, the current conditions are favorable for medium-term dollar purchases and sales in the US stock market, because with such data tightening of the FRS monetary policy looks inevitable, the only question is when is the stage of bargaining transforms into the stage of acceptance with all that it implies.

What else can be sold besides the US stock market is oil. Yesterday it was reported that Saudi Arabia and the United Arab Emirates agreed and OPEC + is back in business. Well, as agreed, in fact, they accepted the terms of the UAE, which will now work with the production base not 3.17 million b / d, but 3.65 million b / d. Recall that this unlocking means that from August production will grow by 400K b / d, and this will be so every new month until December 2021. That is, in six months, OPEC + will increase production by 2 million b / d. Also, the increase in UAE quotas is the opening of Pandora's box. Iraq has already stated that they want that too. And today, we can hear about new people who want to increase production with reference to the UAE precedent.