Key insights
- The article questions the Federal Reserve's response to oil-driven inflation, suggesting rate hikes may be misguided. It argues that higher rates could unnecessarily slow the economy and cause layoffs, while the market might self-correct. The author believes oil inflation has embedded itself and will persist until a recession, regardless of Fed action, advocating for minimal intervention.
The recent rise in inflation, due to iran and oil. Should the Fed step in with higher rates or should the market deal with it?
Example: Fed raises rates. That will increase costs, slow economy/recession and produce layoffs. this will reduce demand on everything and lower inflation.
The Fed doesnt raise rates: Increased oil will slow economy/recession, produce layoffs, reduce demand on everything and lower inflation.
I hesitate to say that the iran oil thing is also temporary. I think the inflation from oil has crept into the economy quite a bit. And even if the war ends soon, that inflation will remain for a long while until there is a recession/layoffs.
This inflation is not due to money printing, so the fed's action of raising rates as the cure seem misguided. No more fed/congress meddling, let the market heal on its own.