Market instability raising the chances of a pivot by the Fed
Overloaded debt in the financial system can spread like a virus
Market instability is the biggest risk to central banks globally, replacing inflation, owing to massive amounts of leverage.
The Bank of England (BOE) is a current example of what happens when things go awry.
Fed doesn’t want to cause a recession. That may be a challenge for two reasons:
Fed remains focused on lagging economic data, such as employment, which are highly subject to future revisions.
Changes to monetary policy do not show up in the economy until nine to 12 months in the future.
After more than 12 years of the most unprecedented monetary policy program in history, the Federal Reserve has put itself into a poor situation.
Policy makers risk an inflation spiral if they don’t hike rates to quell inflation. If the Fed hikes rates to kill inflation, the risk of a recession and market instability increases.
Lance Roberts MarketWatch 29 September 2022
Lance Roberts is chief strategist at RIA Advisors, editor of Real Investment Advice and host of “The Real Investment Hour.”
https://realinvestmentadvice.com/
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