mankind, just facts
The Fed can't tame inflation with just 2% fed funds rate, when core inflation(not including food or energy) is running at over 8%, without a miracle. Now the Feds hope is that supply chain issues ease a lot over the coming months, and that core inflation won't be higher than 3% or so by year end or early 2023. Based on history I don't believe that has any chance of coming to fruition. I believe more like 5% at year end in best scenario.
Also being perpetuated by the mainstream media, is that the consumer is in good shape. I refer to a bloomberg episode of Wall Street Week about a month ago, where Rick Reider of Blackrock stated there was around $1.5T in consumer savings. Now that sounds good, until you do the math. That is, there are 122M households in the country, and on average they're spending around $15K more per year over the 5%/year rise in their paychecks at present. That means, should inflation run high for another 8-9 months, the consumer will have used up all their savings paying higher prices for just about everything. Also when the consumer goes broke, so will corporate revenues and earnings slow dramatically.
Bottom line is, unless the Fed pulls a rabbit out of it's hat, a recession is imminent. That is, either the fed tames inflation by raising rates by at least 4% pronto(which would put us in a mild recession), or the consumer goes broke in another 8 months or so, and inflation continues to spiral out of control, and then we get a long and deep recession. I personally think the fed is playing with fire by not being more aggressive with increasing interest rates pronto. I mean isn't this the same Jerome Powell that said inflation would be "transitory" around 18 months ago ? I can't figure out for the life of me after that blunder, how he thinks he'll be right this time, with only 3 more .5% hikes planned !
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