Fed can’t hike rates as fast as they need to bring down the inflation so it’s going to last till 2023 or beyond. If economy enters into recession, which there is a solid chance of, Fed will have to stop rate hikes and start back QE (like ECB) and that means inflation is here to stay. The only good thing is it will also inflate away the 33 trillion debt we have.
Benchmark rate is a blunt tool. It won't print more oil and food supply, nor can it print more housing stock (sectors where inflation is currently focused). This is where targeted fiscal policy would be most beneficial (mandating remote work where able, encouraging more rapid uptake of EVs to not be beholden to a global oil market while one of the largest suppliers is engaged in a land war and has sanctions applied to it), but that is unlikely to arrive with the current authorities of fiscal policy.
Asset price destruction is also a likely outcome, and will bring down home and equities prices, allowing for those on the margins to get into homes where prices were too high before, as well as get exposure to the stock market for wealth accumulation. This, in my humble opinion, is a desired outcome. TLDR Deflate the asset bubbles.
A light recession would be welcome for price stability, and with labor participation rate where it is at, I think the data shows some reliable indicators that unemployment won't spike when the Fed starts banging away with their rate hammer on the broader economic system. A million people, for a variety of reasons, left the labor force during the pandemic, while 10k Boomers retire per day. The US economy faces an ongoing labor shortage well into the next decade [1].
I understand the sentiment, mind you.....but the last thing we'd want is for say 10 million Americans get motivated and all put EVs on the road tomorrow. We don't have anywhere near enough infrastructure to support a large EV market yet. If you want to hear something sad....the most conservative estimates say that if we started today we're still looking at around 40 years to have a full supportive infrastructure for EVs.
Like you, I got every appendage crossed for some type of soft'ish landing, but with everything going globally pitching a little gas here and there on our inflation fire I am almost 100% positive the Fed will have to keep throwing husky rate hikes and just man up and punch inflation in the nose. And I hate it, but there are going to be a lot of people lose their jobs or get hurt somehow else at that expense.
> This is where targeted fiscal policy would be most beneficial
Something Congress should consider instead of tariffs on imported goods (steal, aluminum, wood) that have failed miserably (actually increased trade deficit) is applying these taxes on virgin material. Promoting recycling rusting steel, scrap aluminum, plastic and fiberglass composite wood and concrete could bring back domestic production and clear our backyards, while being greener than China making raw material and shipping it.
I was under the impression that China had soaked up most of the recyclable steel and part of the reason why things like coke plants near Pittsburgh were reopening was because we were now back to primary steelmaking.
Environmentally and economically driving to a location and back every day unnecessarily is a horrible idea. It's like burning a $20 bill inside a bicycle tire every day. There are some cases where in person work is required to do the job, but a significant portion of jobs don't require it any longer (and probably haven't since the late 90s).
And that’s not up to you or your glorious ruler to decide. I think we are still a free market somewhat. How about government workers get a mandated work from home. I think these jobs are not needed at all. Think how much oil our government and its employees burn.
Progress takes time, and requiring people burn (currently, very expensive and in short supply) fossil fuels to move their bodies to an office to do knowledge work is silly. Perhaps this will be more clear as the global oil market situation deteriorates further. More economic pain may need to occur before such policy is encouraged along. C'est la vie.
>Progress takes time, and requiring people burn (currently, very expensive and in short supply) fossil fuels to move their bodies to an office to do knowledge work is silly.
Yet it's still mandatory for many tech jobs in Europe. Companies are delusional with their butts in seats culture.
Because the factors driving the inflation are from supply side such as energy or supply chain mess. Recessions won’t kill demands as fast - people are still going to need gas and presumably food.
I agree with you and don't understand why you are being downvoted. If the second quater GDP growth comes back negative and it proves that we are in a recession, then the fed will have to halt the interest rate hikes. That will prolong the high inflationary period.