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#If the fed wants to lower the federal funds rate it can free

They will take the economy down if they have to so prices will stop rising. They want people to lose their jobs and make less money.

It took them a while to get going but once they realized inflation was an actual problem they’ve now overcorrected and raised rates at a faster clip than just about every Federal Reserve in history. Kathy Jones from Charles Schwab looked at the change in Fed Funds Rate during the last 40 years or so of tightening cycles:

It was supposed to be transitory and it wasn’t.īut the Fed has already moved ridiculously fast with their tightening. The Fed was behind the eightball in terms of seeing this inflation coming.

#If the fed wants to lower the federal funds rate it can free

I appreciate how the Fed must feel somewhat responsible for the highest inflation reading in 40 some odd years because they kept rates at 0% for a long time and gobbled up bonds like people at Costco eating free samples. They cannot control the actions of a madman in Russia who continues to fight a cruel war against an innocent nation. They don’t dictate how the different waves of Covid will impact the global economy. The Fed was responsible for some of those problems but there were also extenuating circumstances. The pandemic seriously messed up the economy and markets in a multitude of ways. People REALLY don’t like sky-high inflation.īut in other ways, I think what the Fed is doing is INSANE. In some ways, I understand why the Fed is so hell-bent on slowing rising prices.

They are willing to throw us into a recession to slow inflation.

They want wages to fall to slow inflation.

The Fed wants the unemployment rate to rise to slow inflation.

Please allow me to translate each of these statements: We have always understood that restoring price stability while achieving a relatively modest decline, or rather increase, in unemployment and a soft landing would be very challenging and we don’t know, no one knows whether this process will lead to a recession or if so, how significant that recession would be. And I think once you’re on that path, that’s a good thing, and things will start to feel better to people, they’ll feel lower inflation, they’ll feel the economy is improving, and also, if our projections are close to right, you’ll see that the costs in unemployment are, they’re meaningful, and they’re certainly very meaningful to the people who lose their jobs, and we talk about that in our meetings quite a lot.Īnd will this pain lead to a recession? Powell says he doesn’t know: And so what you see in our projections today is that inflation moves down significantly over the course of next year and then more the next year after that. How long? I mean it really depends on how long it takes for wages and more than that, prices, to come down for inflation to come down. When asked how long Americans should be prepared to experience economic pain, Powell said he wants wages to fall: We’re not saying there are too many people working but we’re also not not saying that. I wish there were a painless way to do that, there isn’t. 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.

We’re never going to say that are too many people working, but the real point is this, inflation, what we hear from people when we meet with them is that they really are suffering from inflation. In fact, this week Fed chair Jerome Powell basically said people need to lose their job to slow inflation: The Fed is actively trying to crash the stock market, break the housing market and push the economy into a recession.īecause Fed officials are literally telling us this every time they speak. If anything, it feels like the Fed wants to fight us, all of us, including the stock market and the economy. Don’t fight the Fed used to be a positive slogan.