US Federal Reserve Chief Jerome Powell has said some extraordinary things in the US Senate, says economist Edin Mujagic. He said, among other things, that the macroeconomic figures were “better than expected,” which Mujagic says is bad news.
He says people are quite disappointed by this, and that the whole idea of raising interest rates to slow economic growth hasn’t seemed to have worked out. “They hoped that the interest rate hikes in recent months would open the door for the Federal Reserve to end those hikes before the summer,” Mujagic said. “But the door remains closed.”
“In fact, Powell says he wants to see more American layoffs”
According to Powell, the strong economy is also the reason inflation is still high. Last month, for example, there was little or no decline and the supply-demand ratio became lopsided. “This was a crucial statement for me,” Mujagic said. ‘And he thought that demand should be more in line with supply. Roughly translated, it means he wants to stop the well-functioning economy. In effect, he’s saying that he wants to see more American unemployment.’
Hard landing
And so it looks like it’s going to be a hard landing, despite all efforts to make everything fit together smoothly. Mujagic thinks a fairy tale is happening: the controlled fall of inflation without much impact on the economy. He points out that it has never worked in the past and that there is no reason to assume it will now.
While Mujagic stresses that it’s good that an attempt has been made, he also says it’s important for the Fed to be realistic. “They have to conclude that the chance of it being successful is very low,” he continues. “So looking at all the better-than-expected macro data, Powell says there’s nothing to indicate that interest rates have risen enough. In other words: the interest manager says that too little interest has been collected».
Future expectation
Mujagic therefore believes that rate hikes will continue for a while into the foreseeable future. “The Fed knows the economy was in better shape once upon a time. However, from a credibility perspective it is not possible to pre-order to stop interest rate hikes while inflation is gigantic.’
The Fed is still aiming for a 2% inflation rate, while prices in the US continue to climb between 6 and 7%. Mujagic says Powell has no choice but to continue with rate hikes. And so the Fed’s nightmare seems to come true. The hope was that rate hikes would slow the economy, lower inflation and raise unemployment. But now it doesn’t pay, and that’s the nightmare scenario. And the further you go about raising interest rates, the more likely you are to break something.’
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
