Waiting (For a Recession) Is the Hardest Part

Posted November 6, 2022 by Ben Carlson

In the past you had to read between the lines to understand the Fed’s thinking about monetary policy and what was coming next.  These days they won’t shut up about what they think and what they’re going to do.   I wouldn’t consider myself a Fed watcher but I’m fascinated with what the Federal Reserve is doing right now.  While not a regular Fed watcher I did watch Jerome Powell’s press conference this week after the central bank raised rates 75 basis points for the fourth time in a row to hear what he had to say about their plans.

His message was crystal clear — the Fed is willing to send us into a recession to bring down inflation and they seem to think it’s our only option.

When asked about the possibility of a soft landing for the economy Powell didn’t sound like they were even trying:

I think to the extent rates have to go higher and stay higher for longer it becomes harder to see the path. It’s narrowed. I would say the path has narrowed over the course of the last year, really.

And I just think that the inflation picture has become more and more challenging over the course of this year, without question. That means that we have to have policy being more restrictive, and that narrows the path to a soft landing, I would say.

In other words, we are going to break the economy to slow inflation.

The Fed’s line of thinking here is if they don’t do something now, we run the risk of inflation becoming entrenched. And if inflation becomes entrenched in our collective psychology it’s going to take an even bigger downturn in the future to put an end to it.

They want us to take some medicine now so we don’t have to amputate an appendage in the future. Fed officials desperately want to avoid a replay of the 1970s.

I don’t think this is a 1970s redux but they don’t care what I think.

It’s hard to believe Powell and company are willing to throw us into a recession on purpose but they seem to think they can always just stimulate on the other side of it.

Powell said as much this week:

 To continue reading, please go to the original article here:

https://awealthofcommonsense.com/2022/11/waiting-for-a-recession-is-the-hardest-part/