Fed’s Infinite Wait & See Rate Hikes

WSJ worries Joe & Congress pumped so much free cash into consumers’ hands during pandemic that it’s hyper-fueling inflation as recession looms, thereby forcing Fed to keep raising interest rates longer than its admitting …

The short of it is this: “Buoyed by pandemic-fueled savings, consumers & businesses are proving less sensitive to tighter credit – complicating the Fed’s job.” Put another way: All bets are off on the widely-held optimists’ belief that the Federal Reserve Board will raise its base line interest rates another point or two this year, but then, pull back its inflation-curbing escalation policy in early 2023.

Among other warning signs cited by the article is that “US households have an extra $17 trillion in savings, according to estimates by the Federal Reserve,” which in turn means they are likely to keep spending more than usual, even though prices for basics like food, energy and housing keep going up. The Fed managers aren’t blind to those stats, of course. And, while their official “wait and see” mantra may still hold, the wait and see result may be more rate hikes well into next year after all …

Davd Soul