Inflation at 0.1% for November (Updated)

My first mortgage rate in 1994 was about what it is now. You put on your big boy pants and pay your bills. This country has too many whiny babies used to free money.

 

Time will tell. Its not the 5% rates that worry me, standing alone. It's the possibility of tipping the economy into a recession, or maybe a deeper recession than was necessary, on the mistaken belief that it was necessary as the only way to stop runaway inflation that was believed to be occurring but was burning out without such a dramatic and ultimately unnecessary measure

 

Booms & busts are a normal part of the economy. The FED (& fiscal policy) probably overdoes it on smoothing the bidness cycle in general, but is def far more biased against recession. It is probably the case that policy has done more harm in trying to avoid recessions than the recessions would cause. Most recessions are not a huge deal.

 

I don’t believe raising rates to 5%, and to stop buying and start selling around the margins of the massive fed holdings, in response to 9% inflation is an overreaction, regardless of the cause of inflation. In a normally functioning economy a 2% inflation would see a 3-4% rate of interest. In a rational world savings would net a positive real return.

 

FWIW. I don’t subscribe so I only have a limited version. I don’t understand saying that there will a 3.5% output gap that doesn’t close, and that consumer spending is out of control. Weird. Maybe it is explained for subscribers

We MUST, MUST have a recession, and so far the economy is not cooperating, so they will make it cooperate

Things have changed since then. Fed officials now believe that real U.S. gross domestic product at the end of 2023 will be 6% lower than what they had been projecting in June 2021, while the price level will be almost 7% higher. The unemployment rate consistent with “appropriate monetary policy” at the end of 2023 is now expected to be more than 1 percentage point higher than had been expected last summer.

Fed officials now believe that the U.S. economy is set to be 3.5% smaller—permanently—compared to what they were expecting at the end of 2019, while the price level will be at least 8% higher than the pre-pandemic baseline by the time inflation stabilizes sometime in 2026.

The Fed Is Getting Less Sanguine About Inflation. Here's Why.