Can we handle monetary policy normalization without a recession?

At Wednesday’s Post-FOMC press conference, Chairman Jerome Powell made the following statement: “As I looked around the table at today’s meeting, I saw a committee that’s acutely aware of the need to return the economy to price stability and determined to use our tools to do exactly that. The American economy is very strong and well-positioned to handle tighter monetary policy.”


The equity markets certainly enjoyed hearing that as the S&P blasted higher by about 2.5%. Stocks enjoy soothing and bullish statements like that, at least at the moment they are hearing them. Ready, Fire, Aim.

However, when we get passed words, we have to consider that we are experiencing historic supply-side shocks, first from the worldwide pandemic and now the world’s largest commodity provider (industrial metals, energy, and food) essentially being thrown into the global penalty box.


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