There are a lot of moving parts to the economy, and as the last three years have demonstrated, things don’t always work as you expect.
The market has spoken: It’s expecting that the Federal Reserve’s fight against inflation is just about over. Fed Chairman Jay Powell has hinted that rate increases are nearly at an end. But inflation was still at 6% last count, and Powell insists the Fed is still committed to reaching its 2% target.
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He may be thinking — along with some other economists — that the Fed has already done enough. After all, interest-rate increases can take a few years to ripple through the economy and lower inflation. The current banking turmoil could be the first sign of that starting to work. Forecasters have swung away from a soft landing for the economy and are again predicting an imminent recession, which should put the final nails in inflation’s coffin.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
Photo by Andrew Caballero-Reynolds/AFP/via Getty Images
