Rescue From Recession Won’t Be So Easy This Time

With inflation raging, the famous ‘Fed put’ to save the day with cheap money might not be available.

For more than 30 years we have become used to a reassuringly familiar pattern in business cycles. 

As the economy expands, the Fed raises interest rates to curb inflationary pressures. Eventually some combination of credit squeeze or inventory over-accumulation then precipitates a downturn in the economy. 

The Fed cuts rates—and in recent cycles, supplied the added sugar of quantitative easing through asset purchases—and soon there’s enough free money to revive the animal spirits and get demand moving again.

Gerard Baker WSJ 23 May 2022 

https://www.wsj.com/articles/rescue-from-recession-wont-be-easy-inflation-fiscal-crisis-401k-baby-formula-housing-gas-prices-federal-reserve-biden-11653337995


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