The Fed was wrong about jobs and inflation. We didn’t need a job-loss recession to cool down the growth rate of inflation. The Fed has much to answer for after their massive rate hikes and quantitative tightening policy which disproportionally affected housing in a negative way.
by mafco
6 comments
Or the monetary policies the Fed has implemented are working as intended.
The intent of the fed interest rate hikes was to slow inflation by reducing demand, stalling GDP growth, increasing unemployment and reducing wages. In this case it did none of the above, confounding economists. Economic growth remained strong, unemployment hit record lows, real wages rose and consumer spending has remained robust.
So why has inflation come down sharply? It is almost certainly due to pandemic-related supply chain issues working themselves out and the Russia-led energy war on Europe being overcome. In other words it was transitory, although it lasted longer than most predicted. Krugman coined the term “long transitory” to describe the phenomenon.
Of course the fed would lose a lot of face if it admitted that all the pain its policy caused was for nothing, so it will just take credit anyway for taming inflation and call it a day.
Maybe if the Fed didn’t print 30% of the US money supply during covid we wouldn’t need any kind of landing
Freddie Mac, the main source for mortgage rates, has been keeping records since 1971.
Between 1971 and 2023, 30-year fixed-rate mortgages averaged 7.74%.
Currently, the national average 30-year fixed mortgage APR is 7.47%, so just below the average for the last 50 plus years. Hopefully, it will keep going down.
This is moronic. You understand that the rate hikes are a result of rampant runaway inflation? They literally worked. They did what they were supposed to do. Skilled labor and labor in general is still in high demand as well as service and hospitality jobs. It’s a good thing for workers when unemployment is very low it gives the workers more power.
Inflation was cooled in its tracks and it has largely stalled to more normal ranges. We won’t ever have deflation and we don’t ever want that to happen. It would be a death sentence for the economy. We learned our lessons from the past, we don’t have a housing market super saturated with new builds like 08 and not everyone and their mother can get mortgages when they have no business getting one.
We are nowhere near out of the woods