Powell will have to push rates even higher for the Fed to get inflation to 2%
In January, U.S. retail sales jumped 3%, employers added 517,000 jobs, and the consumer price index rose 6.4% from a year earlier.
The federal budget deficit — thanks to increased entitlements spending, the Chips and R&D Act, the Inflation Reduction Act, bailouts for union pension systems and war in Ukraine — is estimated by the Congressional Budget Office at $1.41 trillion for fiscal 2023.
That’s a huge increase from fiscal 2019, the last pre-pandemic year, when the budget gap was $984 billion.
Overall, the deficit has increased to 5.4% of GDP from 4.6% from before COVID
The Fed so far has raised the effective federal funds rate to little more than half of last June’s peak inflation,
and the rates on both 1-and 10-year Treasurys are currently about 5% and 4%, respectively.
Measured against the most recent CPI reading, real interest rates are negative.
Peter Morici MarketWatch 7 March 2023
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