Article

2023-02-04 Economy

The Fed Can Stop Choking the Economy Now

[Intelligencer] The Federal Reserve has now raised its benchmark interest rate from near zero to above 4.5 percent in the space of a year. That represents the most rapid spree of monetary tightening in U.S. history. It is past time for the central bank to take a breather.

In recent weeks, a growing array of evidence has indicated that inflation is firmly on a downward path. At this point, the imperative to avert an unnecessary recession must take precedence over minimizing inflationary risk.

My argument for that assessment has two parts. The first is a matter of data, the second of values.

The consumer price index (CPI) declined by 0.1 percent between November and December. On a year-over-year basis, inflation remained at the elevated perch of 6.5 percent. But as Paul Krugman argues, for discerning the future path of inflation, it may be better to look at the rate of price growth over a six-month period. That interval eliminates the "noise" (i.e., semi-random variations) that can influence month-to-month changes while still cleaving relatively current trends from outdated ones. And if you take the trend of price growth over the past six months, then annualize it, inflation appears to already be on its way back to the Fed’s 2 percent target.

Posted by Besoeker 2023-02-04 02:04|| || Front Page|| [11133 views ] Top

#1 Maybe. The recent inflation news has been encouraging for a few months; but, then, in 1975 we also thought we had inflation licked.

The Fed has been tightening for some time; but we should view this against the backdrop of the $3 trillion they threw into the economy in 2020 (Fed Reserve Recent Trends)

They have just barely begun to sop this infusion of cash up. And the amount of money still in circulation from it renders the current tightening maybe too little, too late. Since we've never had an avalance of cash like this before, we are in uncharted waters. And I'll say no one really understands what's going on, including the Fed.

Posted by Tom 2023-02-04 07:16|| 2023-02-04 07:16|| Front Page Top

#2 Quit giving banks all but zero interests loans to make interest bearing deposits by customers more attractive as a source of capital.

Posted by Procopius2k 2023-02-04 07:39|| 2023-02-04 07:39|| Front Page Top

#3 I dunno. I kinda like getting some interest from my savings account.

Posted by Abu Uluque 2023-02-04 12:06|| 2023-02-04 12:06|| Front Page Top

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