This will make you less likely to want the new expensive Iphone, especially if you were going to finance the purchase, so as Iphone sales plumit, there will be less of a chip shortage since supply now meets demand.
Why would they start QE? Fed rate is at 4% right now, there's more than enough room to drop rates if an issue occurs.
Given the data however, its unlikely to happen. We're currently at record employment levels. The expectation is for the rate to keep going up to maybe 4.5% next year, and finally that's when inflation is quelled, and we taper off rates sometime next year.
Of course, we need to keep up with economic data and see if these rate hikes have the desired effects.
Right but that will also increase demand and induce more inflation, no? So Fed will be perpetually stuck, in theory at least, to find a balance in their dual mandates.
The big guns is Congress, not the Fed. Possibly the President if you consider things like averting the big Railroad Union strike last week (which would have certainly caused more inflation as shipping costs could have gone up).
Lots of little fires happening around the country. The fed has one lever: interest rates. Congress / President has the other levers.
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Still though: we watch the Fed because the prime rate has a large effect on the value of investments, especially in the question of stocks vs bonds. Its important for the individual investor to follow.
A recession will occur if they overshoot, however.
When you choose to get a loan you're pumping a few hundred thousand that was leveraged into existence into multiple industries that gets distributed into the economy, that gets distributed to hundreds of people working.
When you choose just to just buy an iphone, that's $1000ish your spending of your own money.
This reminds me a lot of the 2008 crisis when Bernanke told us that everything was just fine until banks started collapsing. Personally I think the Fed has turned into a political institution that keeps inflating bubbles until there is no way out. I can't see much wisdom or foresight in their moves. They seem constantly behind the curve and instead of smoothing out business cycles they make them more extreme.
Please someone tell me why this is incorrect.
Calling "inflation" for 10 years in a row is basically boy-who-cried wolf. No one believes you, and when you're finally "correct" about it, its not because you had any analysis, its because inflation inevitably occurs in a boom/bust cycle.
Broken clock correct twice a day + Boy who cried wolf syndrome. I still won't be listening to the permabears / runaway inflation guys even with today's market conditions.
When they say inflation will occur in QE2 in 2010, and those permabears think crazy hyperinflation will occur immediately, then yes, we ignore them.
When they say inflation will occur in QE3 in 2012, and those permabears think crazy hyperinflation will occur immediately, then yes, we ignore them.
When they say inflation will occur in QE4 in 2020, and those permabears think crazy hyperinflation will occur immediately, then yes, we ignore them.
Now its 2022, the Fed has been Quantitative Tightening for a year to deal with the inflation signals we're finally seeing. Hundreds of billions of dollars are being effectively destroyed by these policies.
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So yes, the Fed is finally acting on the inflation issue. But only because the data shows it is finally a problem. We don't just take the permabear crowd word immediately, we move when the data shows an issue. Not before.
There's some people who are just noise and are irrelevant to the discussion, unfortunately. You figure these things out over the years.
Following the data means you're inevitably running after the facts. Running after the facts inevitably causes feedback loops. I'm sure those feedback loops were tuned correctly to not blow the whole thing up, right. Right? RIGHT??
Say ... what happened last time? Oh ... right.
No?
2008 through 2014 had signs of deflation, so the Fed lowered rates and went into QE.
2022 has signs of inflation, so the Fed increased interest rates.
Where is the feedback loop here?
You need protein for cells to work, and you want to grow and grow strong. But most protein has some potential cancer or heart disease correlation.
The fed ¡wanted! 2% inflation since 2008; even with covid fed policy, it took until spring 2022 to catch inflation up to the missed targets.
[1] https://economics.stackexchange.com/questions/15558/producti...