Fed chair, Powell, gave an extraordinary interview today, Feb. 7, just a few days after his last week’s Press Conference, supposedly to clarify for the financial markets (aka really professional investor class) what he meant by the Fed’s rate hike last week. The ‘markets’ don’t believe the Fed will keep raising rates through 2023 and believe Powell will start cutting rates after mid-year even if inflation does not fall to Fed’s 2% target (latest 6.5% CPI). So Fed held second interview in week to reaffirm Fed will keep raising rates until 2% goal reached–which Powell says won’t be reached until 2024.
Did the ‘markets’ get the message? Powell admits this business cycle post -Covid unlike any before. Jobs remain strong (517,000 created last month). Fed policy aims at creating unemployment to lower wages and thus consumption and demand that will reduce prices in turn. That’s the ‘old view’ despite the new post Covid world. Fed thus to keep attacking workers’ jobs and wages to reduce Demand driven inflation, when in fact most of inflation is supply side driven–i.e. price gouging by corps, global sanctions on oil and commodities, supply chain problems, etc. Add new global price pressures coming from 1. China reopening after Covid and more intensive war in Ukraine. Both to exacerbate supply in oil and commodities. Watch oil and gas prices rise again in spring, goods prices too, and housing rents inflation not abate. Result: Powell’s goal of 2% inflation will recede and interest rate hikes will continue into summer and likely beyond.
Consequences: recession in US will deepen, global currency instability rise, and emerging markets economies slide further into inflation and recession.
A more detailed written article on these themes will follow, posted here and on public blogs, in a few days.
For my early take on same topics, listen to my Alternative Visions show podcast of Friday, February 4, 2023.
GO TO: https://alternativevisions.podbean.com/e/alternative-visions-jobs-and-the-fed/
Dr. Jack Rasmus @drjackrasmus
Jack Rasmus 
For me, the key thing is that these Bankers do not know what is going on. They sailed off into uncharted waters with the bailouts of the Great-Not-A-Depression in ’08.
We think of bankers as conservative. We listen to them as if they are oracles of financial knowledge based on centuries of experience. Perhaps that was once true, when bankers were conservative and followed tried and true methods.
But in these times, Bankers are radicals, embarking on a radical course that was based on radical theories. Now, sailing in uncharted waters, they don’t really know what is going to occur and are really just guessing.
The Bankers are trying to figure it out as they go along, and using the classic American method of “fake it until they make it.” The one fact that has remained the same is that they do not care how many non-Bankers get hurt.
“Jobs remain strong (517,000 created last month)”.
Is that figure contested Jack?
How far can they go in raising if its also is raising the dollar is a question, no? They will eventually destabilize more countries like happened in Sri Lanka last year and won’t that also rebound back negatively on the imperialist economies too?
Yes, the effects of rising rates on the US dollar, the latter of which drives down other currencies causing rising prices in those countries is one of several major contradictions to monetary policy in the empire in the third decade of the 21st century. And that contradiction will worsen. I predicted that in my 2017 book, Central Bankers at the End of Their Ropes. I also predicted that Fed raising rates increasingly beyond 5% will result in financial instability in various asset markets. Both these results will mean the Fed will stop raising rates somewhere around 6-7%, which means it won’t be able to shake out inflation which will remain no less than 4% or so, not the Fed’s 2% target.