Disclosure: I don't know the background of Mr Powell nor do I know who or where he gets his advice or information from.
However, I have seen that many times - at the corporate level and governmental level - folks who know tons of theory, who love their symposiums and study groups and studies - might at times ignore, or not be aware of, or want to be aware of events on the ground. And yes - 20/20 hindsight from me, a yum-yum on the internet is easy - after all I was not in the decision maker's chair.
But it does seem that while people on the street knew otherwise - Team Powell held on to "transitory" inflation theory too long. Others said inflation is a "high class problem". Fast forward to now - even though it hurts - for me and most anyone with any skin in the game - I'm glad they are fighting inflation though now, I agree with Siegel - they might be going too far, too fast the other way.
Furthrmore - I'm not sure how "2%" inflation is a realistic goal. When I look at major parts of CPI:
WAGES
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Anyone running a business. Anyone sitting in a restaurant waiting for their entree - - will tell you we are short on labor. The last year saw the lower-rung of the ladder getting raises - raises that are not even in parity with inflation. I don't see how a restaurant, a landscaping company, whatever calls everyone in and says "we're taking your raises away" and expect to keep a workforce.
Furthermore, there's many in America who spent years proclaiming "fairness" "15 an hour" - all the while enjoying investment returns on a tax deferred basis, and many times -earnings created via cheap money, and cheaper labor. Well, now - - anyone from Starbucks to Amazon to Home Depot sees workers in the infancy of organizing and demanding more wages and benefits. In other words - bumper sticker slogans that made some feel good - -- are now getting real. The shareholder - will be sharing.
Housing
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I've missed where there was a national dialogue or effort to increase housing supply. Certainly we allowed demand to increase. Sure , rates ARE pushing prices down - -- but rates are higher so all that means is a young buyer will pay MORE in payment - only less towards principle and more to Big Banks.
Rents certainly can soften if there's mass unemployment. This remains to be seen (yes, part of making big decisions is knowing what you don't know - not proclaiming bumper sticker targets and slogans)
Autos
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Some buyer pushback? Yeah, we're seeing a bit in used cars. A bit.
But even if rates go UP another point or two: There's enough pent up demand. A mentor of mine who owns 7 dealerships - this morning showed me - - -6 months of pre-sold orders and that's just plain the norm right now. Production isn't increasing enough to affect this yet - - my point is that car prices won't go down in a consequential way.
Energy
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Some countries across the pond are leading the way and enjoying life without dirty energy. I wish them well. And while things can soften - there's still billions of people in the world who haven't had a car yet. Or central heating. There will be demand for energy so while it will get cheaper - I don't feel it will be cheap.
So when I look at some key components: Labor, Housing, Autos, Energy.......I foresee a softening, but seriously doubt it tanks enough to hit 2% inflation rates that stick.
And all this assumes that not *one* geopolitical situation goes wrong - which really ties the Fed's hands because that would mean raising rates while economic calamity happens.
So between what I see as mis-steps by Fed and in public policy - and then - across the pond UK adding STIMULATIVE measures while inflation rages -- I'm starting to not take for granted that the 'smart people' and 'grown ups' are in the non political positions that maneuver the economic levers that matter.
If it were unto me- -- there would be a pause in hiking now, to see how it all digests. If it were up to me - I'd look for a few grown-ups from varying political spheres , put them in a room and swear them to refrain from anything stimulative, and to take such *off* the table politically. Pretend we're a 1st world nation and govern accordingly from time to time.
I tend to be too pessimistic for my own good but there's also a fine line between being pessimistic, and cautious. I'm starting to believe that the new American Dream is NOT a picket fence, a home, and state college for junior...but the new American Dream might turn out to be: "I can pay my bills this month".
Yeah, I'm so glad I have young kids now. Geez I'm overweight and ugly, I just can't imagine what the Wifey was even thinking on both of those nights.
