Is the Fed Going Put a Nail in the coffin of the US Economy?

CPI is in.

CPI came in at 5.6% annually. What will the Fed do now? Will the raise rates further continuing to destroy the short-term bond market or will they back off.

Consider the Feds focus. Lower inflation, higher unemployment. Unemployment is at 3.5% March 2023. During Chairman Powell’s testimony earlier this year he stated that we would possibly see unemployment at mid 4% range before they are done raising rates.

The actions of the Fed are now showing a lack of understanding of the repercussions of raising rates so fast in such a short period of time. The Fed Funds rate is at 4.83% as of the April 10, 2023. The present target is 5%.

If the Fed continues to raise until they achieve their overall goal, the banking system will come under enormous pressure from withdrawal from bank checking and savings accounts to a continuous move to money market accounts that pay higher yields. Banks will continue to see the assets they hold in there Hold to Maturity accounts fall in value putting them further underwater. The Federal Reserve has messed this up. Question is, will they recognize what they have done and reverse course?

Subscribers, did you see the portfolio updates made yesterday? See below if you did not.