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Offline libertybele

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Severe recession needed to cool inflation, Bank of America analysts say
« on: July 13, 2022, 12:16:06 am »
"Severe" recession = a depression.

Severe recession needed to cool inflation, Bank of America analysts say

The hottest inflation in four decades will force the Federal Reserve to take such extreme actions to tame prices that policymakers advertently drag the U.S. economy into a deep recession, according to Bank of America analysts.

In a Friday note, the bank's strategists said market pricing suggests inflation will fall to or below the Fed's 2% target within the next two years – but that a major economic downturn is needed in order for that to happen.

"What seems to be forgotten here is that inflation is a sticky, slow moving variable," the analysts led by Ethan Harris wrote. "Spikes can reverse quickly, but underlying inflation tends to move in a gradual lagged fashion with respect to the economy. It is going to take time to cool off the labor market and even more time to lower labor cost-driven inflation."

The analysts added that inflation expectations – which hit another 11-year high on Monday, according to a New York Federal Reserve study – could take some time to moderate. A steeper-than-expected increase in inflation expectations in May actually prompted Fed officials to approve the first 75-basis point interest rate hike since 1994 on fears that higher prices were becoming entrenched.

"The market is not a good gauge of inflation expectations for 'real people' and investors have an oversimplified view of the link between growth and inflation," Harris wrote. "In our view, it is going to be extremely hard for the Fed to get inflation back to target in a two-year time span."

The Bank of America analyst note comes just a few days before the release of new consumer price index data, which is expected to be another doozy: Economists surveyed by Refinitiv expect that inflation surged 8.8% in June on an annual basis, another 41-year high.

There are growing fears on Wall Street that the Fed will trigger a downturn as it raises interest rates at the fastest pace in three decades as it races to catch up with runaway inflation. ...................

https://www.foxbusiness.com/economy/deep-recession-needed-cool-inflation-bank-of-america-analysts-say
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Offline mystery-ak

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Re: Severe recession needed to cool inflation, Bank of America analysts say
« Reply #1 on: July 13, 2022, 12:31:23 am »
Was this covered in Econ 101...I must have missed that chapter.. :cool:
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Offline libertybele

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Re: Severe recession needed to cool inflation, Bank of America analysts say
« Reply #2 on: July 13, 2022, 12:45:39 am »
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Offline LMAO

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Re: Severe recession needed to cool inflation, Bank of America analysts say
« Reply #3 on: July 13, 2022, 08:44:53 am »
They are right. It’s how the high inflation of the 1970’s was fixed
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Offline cato potatoe

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Re: Severe recession needed to cool inflation, Bank of America analysts say
« Reply #4 on: July 13, 2022, 01:29:30 pm »
I don't recall the Bank warning about inflation when the government was expanding the money supply 27% YOY ... back when some of us were accused of wanting to kill every grandma.  Matter of fact, I don't recall any mainstream "economists" referring to this as anything other than "transitory" until a few months ago.
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Offline Wingnut

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Re: Severe recession needed to cool inflation, Bank of America analysts say
« Reply #5 on: July 13, 2022, 01:41:30 pm »
Why the hell aren't CD rates climbing too.  2 Year notes should be at least at 5%.  I guees the big banks a flush with cash.
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Offline Bigun

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Re: Severe recession needed to cool inflation, Bank of America analysts say
« Reply #6 on: July 13, 2022, 01:45:24 pm »
Quote from: cato potatoe on July 13, 2022, 01:29:30 pm
I don't recall the Bank warning about inflation when the government was expanding the money supply 27% YOY ... back when some of us were accused of wanting to kill every grandma.  Matter of fact, I don't recall any mainstream "economists" referring to this as anything other than "transitory" until a few months ago.

 888high58888 :beer:
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Offline Bigun

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Re: Severe recession needed to cool inflation, Bank of America analysts say
« Reply #7 on: July 13, 2022, 01:46:55 pm »
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Offline DefiantMassRINO

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Re: Severe recession needed to cool inflation, Bank of America analysts say
« Reply #8 on: July 13, 2022, 01:53:06 pm »
The same bankers that gave us the Great Recession of 2008?  The same bankers who were responsible for creating the need for the past 14 years of Fed quantitative easing?

A recession without accompanying supply side economic relaxation of government regulation and restriction will risk a deflationary death spiral as asset bubbles burst and financial writedowns shrink the money supply, possibly creating a liquidity crunch.
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Offline catfish1957

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Re: Severe recession needed to cool inflation, Bank of America analysts say
« Reply #9 on: July 13, 2022, 02:45:31 pm »
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Offline catfish1957

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Re: Severe recession needed to cool inflation, Bank of America analysts say
« Reply #10 on: July 13, 2022, 02:51:23 pm »
Quote from: Wingnut on July 13, 2022, 01:41:30 pm
Why the hell aren't CD rates climbing too.  2 Year notes should be at least at 5%.  I guees the big banks a flush with cash.

I got some 3+% CD's coming due in a year  or two.  And if they aren't competitive, they are going bye.  Hate to see a CU Manager cry, but......

I brought this up a few weeks ago.  Reason is, with so much capital being floated in 2.5% mortgages.  The spread will flush them down the toilet if they tried.

Bidenomics.....   Dystopia brought to you in  the package of a dementia laden SOB socialist.  Congrats America....   You asked for it.
« Last Edit: July 13, 2022, 02:53:47 pm by catfish1957 »
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