The current macroeconomic situation

U.S. inflation rate as an indicator

 

          So, I will try to give you a zoom out of the situation .

 

  Usually the market is in good condition when the inflation rate is around 2 or slightly above . The Current U.S. inflation rate is 6,5 .

The problem is not just with the number but the financial policy that FED should take.

 

 

   When inflation is above 3%, the Federal Reserve (FED) may take actions to try to slow down the economy and bring inflation back to its target rate of 2%. This can include raising interest rates, which makes borrowing more expensive and can slow down economic growth. The FED may also take other actions such as adjusting the money supply to try to bring inflation back to target. It's important to note that the FED's actions depend on the specific circumstances of the economy at the time and that there is no one-size-fits-all solution to managing inflation.

Interest rate hikes by the Federal Reserve (FED) can have an impact on the stock market. When the FED raises interest rates, it makes borrowing more expensive, which can slow down economic growth. This can lead to a decrease in corporate profits and can cause stock prices to fall. Additionally, higher interest rates can make bonds more attractive to investors, which can lead to a decrease in demand for stocks.

 

 

            How long does it last ?

 

   In some cases, the FED may be able to quickly bring inflation back to target through actions such as raising interest rates or adjusting the money supply. However, in other cases, it may take longer for inflation to return to target, especially if underlying economic conditions, such as high unemployment or weak economic growth, are contributing to the inflationary pressures.

It's also important to note that the FED does not always succeed in bringing inflation exactly to 2%. Sometimes it might be slightly above or below the target. And the target itself may change over time based on different factors.

Overall, it can take anywhere from a few months to several years for the FED to bring inflation back to target, depending on the specific circumstances of the economy.

 

In the current situation it could probably take 1.5 - 2 years , before FED could stop the quantitative tightening .  Of course we cannot predict the exact outcome of this , but the next years probably won't be easy.

 

One thing must be understood, the consequences of the huge money printing in recent years, especially 2020 and 2021, have started.

 

Beati Paoli

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