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The Fed's Aggressive Rate Hiking Campaign and its Impact on the Economy
In this episode, we delve into the Federal Reserve's recent interest rate hikes and their implications for the economy. Over the past 12 months, the Fed has raised interest rates a staggering 11 times, marking one of the most aggressive rate hiking campaigns in recent history.
Despite these frequent rate hikes, the economy has surprisingly held up better than expected. Job growth has remained strong, and the unemployment rate has remained stable. However, while headline inflation has decreased, core inflation - the metric the Fed targets - remains high.
Interestingly, the markets have responded to the rate hikes with a yawn. Stocks have continued to perform well, and the real estate market has remained robust. This raises questions about the future of inflation and the markets. Will we experience a soft landing without a major recession, or are there potential risks on the horizon?
Speaking of risks, we explore the potential impact of the war in Ukraine and other exogenous shocks, such as natural disasters or geopolitical events, on the economy. These external factors could pose significant threats to the stability of the economy.
Looking beyond the immediate future, we also discuss the long-term challenges the economy faces. Demographic challenges, income inequality, and the ballooning deficit are all factors that could have lasting effects on the economy. However, we explore a potential solution - increasing immigration. By addressing these challenges and improving the living situations of low and moderate-income individuals, immigration could play a crucial role in shaping the future of the economy.
Tune in to this episode as we analyze the Fed's rate hiking campaign, the current state of the economy, and the potential risks and solutions that lie ahead.