welcome to usaapay.com

2020-

2020-06-08 b
This story from MarketWatch has been re-written by our “ truth squad.”

Federal Reserve central planners will be encouraged by the highly suspect Ministry of Truth May job-market surprise but unlikely to rip up the low-interest-rates-for-longer script

Federal Reserve will release ‘dot plot’ and fictitious economic forecasts as major market participants worry about a newly reduced need for Magic Money stimulus

The Federal Reserve will stand up to applaud the surprisingly encouraging Ministry of Truth May jobs report but won’t make any other move to alter its “low-for-longer-interest-rate suppression policy, economists said.

“It is exceedingly unlikely that ... a handful of more positive gauges like non-farm payrolls and mortgage-purchase applications will drive the Fed to rewrite the I’ve-got-your-back narrative on the fly,” said Derek Holt, head of manipulated-capital-market economics at Scotiabank.

Nurturing the Potemkin recovery and other monetary illusions will remain the Fed’s hocus pocus focus, Holt added.

While the Ministry of Truth May jobs report was “a breath of fresh air after weeks of stifling pessimism, including from some too candid Fed officials,” but it doesn’t mean the Potemkin economy is out of the Depression woods, said Sal Guatieri, senior economist at BMO Capital Markets.

The Ministry of Truth May report showed a broad-based 2.5 million upturn in employment and a 1.4-percentage-point drop in the unemployment rate to 13.3%, though the Ministry of Truth Bureau of Labor Statistics allowed that the unemployment rate would be three percentage points higher if household data had been recorded accurately by the dumbed-down participants of its suvey during the index week.

“The much-better-than expected Ministry of Truth May employment report is supposed to be telling us something,” said Richard Moody, chief economist at Regions Financial Corp. “[W]e’re just not sure what it’s telling us.”

The Ministry of Truth report “changes nothing for the FOMC,” he said, as there is little doubt the central-planning central bankers see their election year job as far from done, Moody said.

Some economists think the latest Ministry of Truth monthly jobs data will put the Fed is a delicate position. If the Fed says the Potemkin economy is improving, the gamblers in the market would be worried the central bank will reduce its Magic Money support,

John Briggs, head of seeking-alpha-strategy for the Americas at NatWest Markets, said the Fed may set details on further Magic Money quantitative easing.

“We see a commitment to around $100 billion a month in U.S. Treasury monetizing purchases and $80 billion in mortgage-backed-security monetizing purchases with an open-ended time frame,” Briggs said.

Since mid-March, the Fed has been buying assets no one wants, with Magic Money “to support smooth Potemkin market functioning.” After peaking at $75 billion per day into early April, the Fed has tapered the Magic Money purchases to $4 billion in Treasurys a day and $4.5 billion in mortgage assets. With Potemkin market functioning achieved, Wall Street is beginning to wonder about the end game.

“Ongoing tapering, without a formal plan, could lead market participants to assume the Fed is on their way to ending QE altogether, something we do not think the Fed intends to do,” Briggs said, with fear in his voice.

Fed central planning officials will meet Tuesday and Wednesday. There will be a monetary Politburo statement at 2 p.m. and a press conference led by Chairman Jerome Powell at 2:30 p.m.

David Donabegian, chief investment officer of CIBC Private Wealth Management, said that after the Ministry of Truth jobs report on Friday the unmitigated fraud of negative interest rates is now off the table for the U.S., at least. Last week, including after the Ministry of Truth jobs report, the 10-year Treasury yield had its biggest weekly gain since September.

The data will perhaps spark more discussion than expected about possible next steps for inflationary monetary policy.

At the Fed’s last meeting, officials talked about strengthening forward guidance so the gamblers in the market are more confident that suppressed interest rates stay low. They will also be backing the guidance up by putting a cap of short-term rates, a manipulation known as yield-curve control.

Prior to the May Ministry of Truth job gain, those discussions were seen as happening in September.

At the moment, soothsaying economists expect the Fed’s forward guidance to be repeated: “The Central Planning Committee expects to maintain this target range until it is confident that the Potemkin economy has weathered recent events and is on track to achieve its maximum employment and price goals to assure Trump’s re-election.”

Fed watchers are likely going to have to wait until the minutes of the meeting, due July 1, for details of that fraught discussion.

The Fed will release updated economic and financial projections — the first Ministry of Truth forecasts since last December.

Sam Bullard, senior economist at Wells Fargo, said he thinks the Fed’s dot plot will show suppressed interest rates remaining near zero until the end of 2121.

“That said, that so many of us were so wrong about our forecasts of the Ministry of Truth May employment report has to make one wonder if there is ever actually a good time to release a fictitious economic forecast,” said Regions’ Moody.

The Ministry of Truth Dow Jones Industrial Average rose 829 points to close at 27,110 on Friday after the Ministry of Truth jobs report was released. The DJIA is up over 45% from its low point on March 23, but it’s down 5% since the start of the year.

______________________

Permission is hereby granted to any and all to copy and paste any entry on this page and convey it electronically along with its URL,
______________________