Odd Lots Where Things Stand Now With Inflation and the Fed
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Dec 19, 2022 Jon Turek, founder of JST Advisors and author of the Cheap Convexity blog, joins Tim Duy, Chief US Economist at SGH Macro and an economics professor, for an engaging discussion on inflation and the Fed. They analyze the recent CPI report showing cooler inflation and the Fed's shift to a 50 basis point hike. The guests explore the challenges of monetary policy, labor market dynamics, and the global economic impact of recent central bank actions, emphasizing the importance of adapting investment strategies in this uncertain landscape.
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Unemployment and Soft Landings
- The Fed hopes for a modest increase in unemployment, aligning with the idea of a soft landing.
- Historical data suggest that a modest increase in unemployment is unlikely.
Monetary Policy Lag and Overshooting
- The Fed anticipates a contained unemployment rate peak, despite current levels.
- Questions arise about the lag of monetary policy effects and potential overshooting.
Immaculate Disinflation and Fed's Reaction
- The possibility of achieving disinflation without substantial job losses remains uncertain. Recent data suggest wages are growing robustly, while inflation is falling.
- The Fed's reaction to such a scenario depends on its belief in a sustained trend.