Some things are too heavy for one person to lift. That’s where we are with respect to the economy and, by extension, the markets. The Fed right now is being expected to do all the heavy lifting needed to slow inflation, calm the markets, keep the economy growing and provide a soft landing. But they are only willing to go so far. Right now, their limit is 3.5% on the Fed Funds rate and 5.2% inflation by the end of the year. With the very real possibility of negative to flat (at best) GDP growth in the first half of the year, as mentioned above, the economy would need to grow 3.4% in the last six months of 2022.
It’s hard to believe that can happen without some serious help from somewhere else. If the Fed deals with all things monetary and the federal government deals with all things fiscal, then how can the government help with the lift? The Fed claims it cannot help with energy and food, but there’s likely something policy-driven that this administration can do to help carry the load. And while they are at it, they could stop promoting the narrative that the economy is strong. C’mon, man, 1-2-3, lift!