The Fed is determined to hike rates rapidly. In the short-term the US economy will be supported by the many cushions present in the economy, as a result of all the fiscal and monetary support provided during the Covid crisis. The Fed will be in a more difficult situation in 2023.
The Fed admits to being behind the curve. The Fed is determined to hike rates rapidly, as the labour market is extremely tight and inflation is stronger and more persistent than expected. Now, two questions for investors: (1) the pace of slowdown in US economic growth in a context of tighter financial conditions and (2) what trade-off would the Fed make in the case of a sharp slowdown in growth?
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