Let's be clear about one thing: markets aren't in turmoil because the Fed might hike 75 basis points this week.
Let's be clear about one thing: markets aren't in turmoil because the Fed might hike 75 basis points this week. They're in turmoil because inflation is really bad, and no one has yet stepped up to declare--like Mario Draghi of Europe did when their debt crisis was reaching a climax--that the central bank will do "whatever it takes" to fix the problem.
. The unexpectedly sharp rebound in demand has tightened markets of all types to the point of breaking, and it wasthat juiced us to this point, before pandemic-hit supply chains were ready to handle it. The Fed at best can get out of the way and not counteract this process right now. By pivoting to rate hikes and balance sheet shrinkage, it is at least slowing the amount of stimulus it's adding to the economy--stimulus that would worsen these problems. The fact that so much of the economy's "nominal" growth is being eaten up by inflation right now is plain evidence that policy overshot. The U.S.
This is why interest rates are once again spiking higher, especially since the super-high CPI report last Friday. The 10-year Treasury yield nearly hit 3.3% this morning; that means the 30-year fixed mortgage rate will probably cross above 6% by this afternoon.
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