He's Still Behind The Curve Jerome.

Jerome Powell has been reborn. Today, he's a natural reflection of his true economic nature, basically, a Volcker-inspired monetarist. How tough it must have been for him to be truly accommodative, pushing forward with QE while knowing that inevitably it would be massively inflationary. Things were chugging along just great straight through 2021 with The Fed Funds Rate effectively at below 1%. 

After all of that, it was almost a foregone conclusion that The Federal Reserve would put blinders on and remain inexcusably dovish. Rates almost imperceptibly began to rise, but remained below the 2% target all the way up to last spring. First, The Fed said that the 2% target would not be breached, and it was. Then they argued that inflation would be transitory, and it wasn't. Now they call it sticky and stubborn.

After the last 50 basis points rate hike, the FFR is now at 4.4%. The consensus among the so-called experts is that a pause in hikes is now in order, with some speculating that rate drops could begin as soon as this spring. 

Talk about pie in the sky: the official inflation rate is now 7.1% having dropped from a high of 7.7% previously. That of course is the cooked number that does not include housing, food or gas. In reality, the unofficial number is more like 15%, having dropped about two points from earlier monthly calculations.

So...The Fed still remains massively behind the curve and has no other choice but to wreck the economy in search of future perceptible inflation drops. People forget that when Volcker came in and got started, the FFR was already at 11%! He finally broke the back of inflation by raising rates all the way to 19.5%.

That means the wrecking ball is already on order and about to be delivered. There's no chance of a soft landing for this economy -- in fact, I expect continued rate hikes at least all the way to the fall, coupled with a sooner than expected recession onset. IMHO, it's only once a recession is confirmed that The Fed will finally begin to pause and then backtrack. Not before.

Put succinctly, a recession is definitely in the cards, along with a steady move up in unemployment. Jerome knows he's still behind the curve, so don't expect Powell to change course anytime soon. Going forward, it's not just inflation that's sticky and stubborn. So's Powell, or at least his mindset. For the foreseeable future, it's still full speed ahead and damn the torpedoes, come what may.