‘Roaring’ Inflation To Force Rate Hikes; This Explodes Next | Steve Hanke

Summary

Steve Hanke argues that inflation remains stubborn and money supply growth will compel the Fed to tighten, while also predicting crude oil prices will rebound due to depleted inventories and Iranian control of the Strait of Hormuz.

• Kevin Warsh's first FOMC meeting kept rates unchanged but revealed a hawkish tilt with increased probability of future hikes.
• Hanke believes persistent inflation (4.2%) and accelerating money supply growth will force the Fed to tighten by year-end.
• Commercial bank loan growth is a key driver of money supply, and potential deregulation could further fuel lending.
• Warsh is not rejecting monetarism outright, unlike Powell, but is only a 'monetarist light'.
• The Iran deal includes a $300 billion fund and grants Tehran de facto control of the Strait of Hormuz, a major strategic loss for the U.S.
• Oil inventories are severely depleted after the U.S.-Israeli strikes on Iran, and refilling them will push crude prices higher.
• Markets initially reacted to Trump's G7 press conference rather than the Fed decision, but the hawkish shift later drove yields up and stocks down.