Fed navigates delicate balance between recession and inflation
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Despite recession fears, the Fed has helped engineer a "miracle" soft landing so far, with strong GDP growth, a healthy job market, and stock market highs.
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However, inflation ticked higher in January to 3.1%, so the Fed's work battling inflation isn't done yet.
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The Fed plans to keep rates high until they gain confidence inflation is moving to 2% sustainably. Markets have aligned with this cautious approach.
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If policy stays restrictive for too long, recession risks rise. But easing too fast risks reigniting inflation. The Fed must strike a delicate balance.
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With inflation showing signs of peaking, most expect the Fed to start cutting rates by mid-2023. But some see risks of further hikes if inflation persists. The path ahead is still uncertain.