Quote:
Originally Posted by chassis
2000cs what is your thesis for the "6 months, likely more than a year" statement? Please explain how you are thinking about this.
What if someone said that inflation has peaked? What would you think about that?
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Powell described inflation as “persistent” this week, and the Fed removed any mention of transitory or temporary. That is the basis for the 6+ months comment. Also fiscal policy typically has a lag of at least 6 months (may have been faster with the direct stimulus portion), so there is likely more inflationary pressure to come. However it is possible inflation has peaked, but also won’t fall nearly as fast as it rose (because it takes a while for cost increases to roll through the economy).
On the stagnation side, the Fed’s actions to reduce/control inflation will be recessionary. They will have to walk the line of lowering inflation without tipping the economy into recession - but no doubt growth will be slower.