Should Congress Shrink the Deficit to Fight Inflation?
Stephanie Kelton 27 May 2022
Should Congress Shrink the Deficit to Fight Inflation? (substack.com)
Inflation in the United States has probably peaked
I realize in saying that I risk coming across as the boy who cried “no wolf.”
Markets have noticed the relatively good news on inflation. We can more or less directly calculate market expectations of inflation by looking at the “breakeven rate,” the interest rate spread between ordinary United States bonds and bonds that are indexed to protect investors against inflation.
And breakeven rates have come down a lot over the past month or two:
So how have the permahawks reacted to the inflationary surge of 2021-22? With stern expressions of concern, of course. But you didn’t have to do much reading between the lines to detect a fair bit of underlying glee that this time their proclamations of doom were finally coming true.
The good news is that this wave of doomsaying will probably be, um, transitory.
Paul Krugman NYT 27 May 2022
https://www.nytimes.com/2022/05/27/opinion/inflation-prices-stagflation.html
Why the Dow finally bounced
Real, or inflation-adjusted, interest rates fell over the past week, corporate credit spreads tightened, and investor expectations for future Federal Reserve rate increases moderated,
That leaves uncertainty about how high the federal funds rate, currently at 0.75% to 1%, will ultimately go. Market pricing points to a so-called terminal rate between 2.5% and 3%, but anything that hints it will be higher than that will rattle investors
MarketWatch 28 May 2022
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