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Wednesday, July 6, 2022

Fed Has To Balance Short Game Vs. Long Run

Fed Has To Balance Short Game Vs. Long Run

Investing.com – Everything the Fed knows about the economy points to a continuation of its gradual, incremental approach to raising interest rates. As always, it’s what the Fed doesn’t know that makes its job difficult.
Economists say there’s little reason for the Fed to change course anytime soon given the current goldilocks economy–it’s neither hot nor cold, with moderate growth and modest inflation.
How long that lasts, however, is the big questions for the Fed. Economists say history shows certain forces eventually come to bear. Wages jump in a tight job market. The wealth effect of a booming housing market inflates consumer spending. Rising energy prices feed into the broader economy.
This Fed also has a wild card to contend with. And that’s the enormous fiscal stimulus of the tax cut package. Sooner or later, that will add fuel to the economy.
Economists say how well the Fed anticipates those forces and times its policy response will be the difference between success and failure.

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Source: Investing.com

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