Rosenberg: The Fed’s rate hike path risks a major policy blunder

Rosenberg, founder of Rosenberg Research, contends that current economic data does not support a hawkish shift. He describes the Fed's looming decision as an attempt to flex anti-inflationary muscle rather than a response to genuine market signals. According to Rosenberg, the Consumer Price Index (CPI) figures relied upon by policymakers are distorted by discrepancies between government reports and actual industry data. He points to conflicting prints in hotel rates, telecommunications, and used car prices as evidence that the core inflation picture is significantly flatter than suggested.

Beyond the headline numbers, Rosenberg identifies a critical omission in the current policy narrative: the stagnation of wages. He notes that real average hourly earnings have declined over the past year, arguing that sustainable inflation cannot persist without labor market strength. Instead of demand-driven inflation, he characterizes rising energy costs as a supply-side tax squeeze on the private sector. History, he notes, supports this view; past Fed chairs like Alan Greenspan and Ben Bernanke prioritized economic stability over rate hikes during oil-driven shocks.

Investors should focus on the Fed’s upcoming "dot plot" projections rather than the immediate rate decision. If the central bank validates market expectations for four or five additional hikes, the economy may face a breaking point. For those looking for value, Rosenberg suggests the current Treasury yields offer a rare opportunity. He remains bearish on the U.S. dollar and views gold as a hedge, noting that the metal's resilience suggests it has hit a solid floor. The true test for the markets, he concludes, arrives on November 4, when the Treasury reveals its next refunding strategy.