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Counter-point is that the accepted history of the Volker interest rate hike might be bad economics, and that it was actually the oil price reductions that happe

by boc 4y ago

Counter-point is that the accepted history of the Volker interest rate hike might be bad economics, and that it was actually the oil price reductions that happened simultaneously which caused disinflation. If the Fed's research behind the scenes is convinced that this is the case, they might run rates dovishly and hope for KSA to save the day. Energy price shocks ripple across every part of the economy at high speeds, causing inflation in unexpected places. Point is that there's an outside chance that aggressive interest rate hikes are deemed unnecessary when combatting inflation.

vishnugupta 4y ago
Funnily almost exactly a year ago I was feeling uneasy about the whole frothy job market and was looking around for signals to locate the moment in a business cycle. Back then [1], Fed was signalling that they'd begin rate hikes by 2023. Hindsight; fed acted couple of quarters too late IMO. They completely evaded or invented new ways ("transitory") to describe scorching inflation as early as one year ago that was experienced by people on ground. And when the data came in around Nov 2021 they began to be getting their acts together but by then it was way too late. Though I agree with you; it's not straightforward. No one expected Putin to invade Ukraine, so there's that. But the signs of fed rate hike was clear IMO. If one wanted to be prepared and forego some of the profit they had about an year to prepare. [1] https://www.aljazeera.com/economy/2021/6/16/federal-reserve-raises-inflation-expectations-mulls-2023-liftoff https://www.aljazeera.com/economy/2021/6/16/federal-reserve-...
paganel 4y ago
> and that it was actually the oil price reductions that happened simultaneously which caused disinflation. Hopefully the powers that be also know that, hence Biden's planned visit to Saudi Arabia [1], plus the NATO secretary general saying this weekend that "peace is possible" in Ukraine, certainly a different mindset than the one present among most of the Western leaders about two months ago (when going all in in order to get Putin down was presented as a plausible solution). We'll see what the future will bring. [1] https://www.wsj.com/articles/white-house-set-to-announce-biden-trip-to-saudi-arabia-soon-11654997595 https://www.wsj.com/articles/white-house-set-to-announce-bid... [2] https://www.youtube.com/watch?v=KUGY692OT6g https://www.youtube.com/watch?v=KUGY692OT6g (the quote I mentioned is made at the start of the video)

by boc 4y ago

vishnugupta 4y ago

Funnily almost exactly a year ago I was feeling uneasy about the whole frothy job market and was looking around for signals to locate the moment in a business cycle. Back then [1], Fed was signalling that they'd begin rate hikes by 2023. Hindsight; fed acted couple of quarters too late IMO. They completely evaded or invented new ways ("transitory") to describe scorching inflation as early as one year ago that was experienced by people on ground. And when the data came in around Nov 2021 they began to be getting their acts together but by then it was way too late. Though I agree with you; it's not straightforward. No one expected Putin to invade Ukraine, so there's that. But the signs of fed rate hike was clear IMO. If one wanted to be prepared and forego some of the profit they had about an year to prepare. [1] https://www.aljazeera.com/economy/2021/6/16/federal-reserve-raises-inflation-expectations-mulls-2023-liftoff https://www.aljazeera.com/economy/2021/6/16/federal-reserve-...

paganel 4y ago

> and that it was actually the oil price reductions that happened simultaneously which caused disinflation. Hopefully the powers that be also know that, hence Biden's planned visit to Saudi Arabia [1], plus the NATO secretary general saying this weekend that "peace is possible" in Ukraine, certainly a different mindset than the one present among most of the Western leaders about two months ago (when going all in in order to get Putin down was presented as a plausible solution). We'll see what the future will bring. [1] https://www.wsj.com/articles/white-house-set-to-announce-biden-trip-to-saudi-arabia-soon-11654997595 https://www.wsj.com/articles/white-house-set-to-announce-bid... [2] https://www.youtube.com/watch?v=KUGY692OT6g https://www.youtube.com/watch?v=KUGY692OT6g (the quote I mentioned is made at the start of the video)