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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]. [1] https://www.youtube.com/watch?v=LI4mDQeo9eE |
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.