Federal Reserve Chairman Jerome Powell speaks at a news conference following a Federal Open Market Committee meeting in Washington, D.C., May 4.Well, so much for optimistic assurances about inflation, interest rates and recession. Federal Reserve Chairman Jerome Powell’s relatively sunny take on all three on Wednesday, after the latest Federal Open Market Committee meeting, had pleased investors.
The volatility isn’t surprising given the policy variables and risks. Investors are trying to judge how high the Fed will have to raise rates to break the highest inflation in 40 years. At the same time, the Fed is promising to shrink its bond portfolio, which means lifting its foot off the neck of long-bond prices. Markets are trying to make sense of a policy environment that no one has seen in four decades.
But the economic risks are significant, notwithstanding Mr. Powell’s assurances on Wednesday that the economy is strong. Even normal monetary tightening cycles produce financial casualties as liquidity ebbs. This time around could be worse because the monetary excesses were so extreme in 2020 and 2021. The surprise will be if there are no nasty financial surprises—meaning credit failures—this year and next.
opinion Most of this mess is due to the people who refused to get vaccinated.
opinion
opinion So you're saying it's going to get worse. Got it.
opinion FJBANDHISSUPPORTERS
opinion You where not leading momentum by emotion where you.
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