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Yak <yak@inbox1.com> wrote in news:ssnaqv$kqie$25@news.freedyn.de:

Editor's Note:

This post was updated on February 26, 2021 with new data.

Biden-voting counties equal 70% of America’s economic losers

Can the Federal Reserve keep raising interest rates and defeat the
nation's worst bout of inflation in 40 years without causing a recession?

Not according to a new research paper that concludes that such an
"immaculate disinflation" has never happened before. The paper was
produced by a group of leading economists, and three Fed officials
addressed its conclusions in their own remarks Friday at a conference on monetary policy in New York.

When inflation soars, as it has for the past two years, the Fed typically responds by raising interest rates, often aggressively, to try to cool the economy and slow price increases. Those higher rates, in turn, make
mortgages, auto loans, credit card borrowing and business lending more expensive.

But sometimes inflation pressures still prove persistent and require ever- higher rates to tame. The result — steadily more expensive loans — can
force companies to cancel new ventures and cut jobs and consumers to
reduce spending. It all adds up to a recipe for recession.

The Fed's favorite inflation gauge shows prices accelerated in January
And that, the research paper concludes, is just what has happened in
previous periods of high inflation. The researchers reviewed 16 episodes
since 1950 when a central bank like the Fed raised the cost of borrowing
to fight inflation, in the United States, Canada, Germany and the United Kingdom. In each case, a recession resulted.

"There is no post-1950 precedent for a sizable ... disinflation that does
not entail substantial economic sacrifice or recession," the paper
concluded.

The paper was written by a group of economists, including: Stephen
Cecchetti, a professor at Brandeis University and a former research
director at the Federal Reserve Bank of New York; Michael Feroli, chief
U.S. economist at JPMorgan and a former Fed staffer; Peter Hooper, vice
chair of research at Deutsche Bank, and Frederic Mishkin, a former Federal Reserve governor.

More hikes expected
The paper coincides with a growing awareness in financial markets and
among economists that the Fed will likely have to boost interest rates
even higher than previously estimated. Over the past year, the Fed has
raised its key short-term rate eight times.

The perception that the central bank will need to keep raising borrowing
costs was reinforced by a government report Friday that the Fed's
preferred inflation gauge accelerated in January after several months of declines. Prices jumped 0.6% from December to January, the biggest monthly increase since June.

The latest evidence of price acceleration makes it more likely that the
Fed will need to do more to defeat high inflation.

<https://www.cbsnews.com/news/recession-inflation-federal-reserve- interest-rate-hike-2023/?intcid=CNI-00-10aaa3b>

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