<normative discussions are constructive--who cares what they SHOULD do.>
In that vein, I'd say your setup description is fairly close to mine, except I don't see the inflation being unleashed as "disappearing overnight", even if an economic slowdown materializes. I certainly see little correlation at present between US job and wage growth (or lack thereof), and the type of input inflation I've spoken about.
As far as CBs, I think they WILL turn their attention away from PCE deflators and job counts, and towards these runaway input issues, and begin sort of a half assed attempt (they will call it "stress test", see the Greenspan speech) to tackle it. So I'm definitely not in the after the election camp, and see rate hikes coming on fairly steadily. MY SWAG: 1.25 FF by April, 1.50 by June, 1.75, by Sept, 2.00 by Oct. And yes, the economy hits the wall driven mostly by big food and energy bills (the hangover from the hyper-stimulus, in aggregate I'm guessing maybe $150-$200 Billion diverted)
Message 19713454
for consumers, and no more refi, tax rebate stimulus. |
