The Federal Reserve’s recent pausing of interest-rates hikes opens America’s door to stagflation

 Now, in the wake of the pandemic and $4.6 trillion in federal relief and stimulus spending, which was enabled by the Powell Fed expanding its balance sheet to monetarize much of the resulting new debt, year-over-year inflation was 9.1% in June 2022. 

The Fed responded by raising the federal funds rates to 5.1% by May of this year — far-below peak inflation.

Although home buyers, businesses and equity investors might want lower interest rates, those currently are not terribly high when measured against expected inflation.

As a result, home sales and prices are in a rebound, interest-rate-sensitive tech stocks are leading a stronger U.S. stock market, and wages, according to the Atlanta Fed, are rising at 6% annually.

In the months ahead, we could see temporary dips in inflation thanks to rents, but over the next few years inflation in the range of 4% is likely. 

With U.S. economic growth running at less than 2%, that’s stagflation. 

 Peter Morici MarketWatch 11 July 2023

https://www.marketwatch.com/story/why-the-feds-fumble-on-inflation-leaves-the-economy-vulnerable-to-stagflation-39fc6a7e

CPI still rising at about 5%

Peter Morici MarketWatch 30 May 2023

https://englundmacro.blogspot.com/2023/05/cpi-still-rising-at-about-5.html