For most of last year, it was apparent that the Federal Reserve wanted the economy to stop growing so fast. Though you would never hear them say that they were trying to force us into a recession, certainly forecasters were predicting a recession. But the recession never came as the economy and especially the American consumer provided some formidable resilience. Month-after-month we expected the economy to slow down, yet this never happened.

Well, finally there are signs of a slower economy. Of course, this happens after the economic prognosticators have all but buried the word recession and replace it with the phrase “soft landing.” And as the economy and inflation slows, we hear the same refrain from the members of the Fed – we are not stopping until our inflation work is done. While this is commendable, we would like to remind our readers that the Fed has a history of waiting too long to get things started and then waiting too long to end their activities.

The inflation we witnessed was world-wide based upon effects of the pandemic. The world economies halting on a dime and then starting up again armed with lots of stimulus in the form of government spending and low interest rates. Should the Fed have started raising rates from zero more quickly? Probably. Will they hold higher rates longer than they should, thereby risking a recession? We hope not. The Fed is meeting as we publish this newsletter. It will be interesting to see what they say.