Fed Chairman Powell tried to convince the public inflation was “transitory”. Eventually, he could no longer ignore reality. The Fed raised interest rates several times and vows to continue to do so, until inflation is stabilized at 2%.
As expected, mortgage rates are skyrocketing, the real estate market is tumbling, along with the stock and bond markets. The Party’s Over!
When asked about unemployment, Powell said:
“I think that there’s a very high likelihood that we’ll have a period of…much lower growth. …. And it could give rise to increases in unemployment, but I think…we need to have softer labor market conditions as well.
…. People really are suffering from inflation. And if we want to set ourselves up, really light the way to another period of a very strong labor market, we have got to get inflation behind us.
I wish there were a painless way to do that, there isn’t. …. What we need to do is get rates up to the point where we’re putting meaningful downward pressure on inflation, and that’s what we’re doing….”
He emphasized that it would be a mistake to reverse course too soon which would make things even worse. Whether he is willing to take the pressure Volcker did when he tamed inflation remains to be seen.
Continue reading “The Party’s Over!”