In every country around the world, the central bank plays an oversized role in the economy of the country. The Central Bank or in the US Federal Reserve sets monetary policy or interest rates. In the capitalist world, business runs on credit and lower the interest rate the better. It is the same for the individual, the lower the interest rate that you have to pay, the better it is for the consumer. The problem is inflation and the Federal Reserve must do things to ensure inflation does not get out of control. The Federal Reserve however does not run government policies; the administration does that. At times, what the administration does contributes to inflation, particularly at elections – a chicken in every pot. It is a good election slogan, but it contributes to rising inflation, because somebody has to supply all those chickens at a price every consumer can afford.

In an article by Colby Smith of The New York Times News Service, the late July meeting of the US Federal Reserve kept interest rates the same at 3.5 to 3.75%, a level that has been in place since January.

The Federal examines what is happening in the economy such as oil prices increase and decrease due to the Straits of Hormuz opening and closing because of the war in Iran; President Trump adding another round of tariffs; ICE and sweeping immigration affect on the labor force; the AI boom for chips and people to build the data centers. and the normal cycles of the economy.

The Federal Reserve Chair is Kevin Warsh, his reputation when he was on the Federal Reserve in the past was an inflation fighter. He wants inflation to be near 0. The problem is overall consumer prices were 3.5% higher in June than a year earlier, down from a 4.2% annual rate in May.

The Federal Reserve has a target of 2%.

On the Bond markets, longer dated Treasury yields are up and closing on its peak from May of 5.2%. That was highest level since 2007.

Linking to dividend paying stocks, with low inflation, the stock market is the best alternative, when inflation rises its head and interest rates rise, parking your money in safe secure Treasuries at above 5% is a good alternative. If you can receive higher yields on very good corporate debt, that is even better. In every market there is an alternative, part of your homework is to know what alternatives are for you.

There are more questions than answers, till the next time – to raising questions.