Late last month, the Federal Reserve announced the latest incremental hikes in its benchmark interest rate, pushing it to its highest level in 22 years as it continues to fight what it calls persistent inflation.
Dan Walters
CalMatters
Opinion
The quarterly rise of 1% sparked renewed debate among economists and politicians over whether the Federal Reserve’s anti-inflation measures will slow the economy into a so-called “soft landing” or trigger a recession.
The recession that many economists thought had arrived by now has not reared its ugly face, prompting “I told you so” from those who didn’t see a slowdown on the horizon.
“Much to the chagrin of those who predicted otherwise, the US economy has stubbornly continued to grow and 2023 looks set to be a better year than 2022,” wrote one of the optimists, California economist Christopher Thornberg, recently.
“That’s not to say we aren’t seeing signs of stress in the economy, caused by higher interest rates and the recent surge in inflation,” Thornberg continued. “Rather, we never classified these problems as systemic because they were caused by the same reason that drove consumer spending higher – the excessive stimulus during the pandemic.”
“The biggest risk, as we have seen, has always been inappropriate tightening by the Federal Reserve in response to its original sin of excessive easing.”
Dan Walters has been a journalist for almost 60 years and has spent all but a few of those years working for California newspapers. He began his professional career in 1960 at the age of 16 with the Humboldt Times. CalMatters is a public interest journalism company that explains how the California State Capitol works and why it matters. For more columns by Dan Walters, see calmatters.org/commentary.
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