Is Stagflation Coming?

Higher prices and declining economic performance

Let’s talk about the current situation.

We have 7% inflation with no signs of it slowing down. It can get worse before it gets better. During their meeting, the Fed said they would start raising rates and soon stop QE. These measures would slow down the economy.

Higher rates increases the cost of borrowing money. Businesses will take out fewer loans because of the higher rates. Many businesses use leverage to expand. Look no further than real estate investors. Some of them live on leverage. Businesses may have to reduce staff to compensate for additional expenses.

The Fed’s current direction may be too little, too late. The Fed could have slowed down earlier, but now we’re seeing soaring prices. Their initial measures may not be enough to slow down inflation in the short-term.

They also told us inflation was transitory. This tweet encapsulates the Fed’s current predicament.