Powell facing choice between inflation or recession

The Fed is stuck between a rock and a hard place.

Stick or twist?

Who’d be Jerome Powell these days? Faced with a choice between letting inflation race across the US or battling inflation and plunging the country into a recession. Hmm…not easy. Whatever he chooses, he’s sure to be wrong in someone’s eyes.

But inflation just keeps rising and whether or not Powell wants to, he’s being urged to take control of prices that increasingly seem out of control. The only tool at his disposal though is raising interest rates and driving a major slowdown in economic activity – something that’s set to plunge the US, and many others, into a recession. How’s your week going?

Things can only get better

Despite trying his best to get all sides on board, Jerome Powell has reached his inflation limit. For a long time, he was coy when it came to hiking rates. But as the situation has escalated, it’s increasingly looking like he’s adopting a hardline approach to spiraling prices. He could be about to hike them again tomorrow.

And what will the effect be? There’s no real sign that interest rises are having a huge impact on prices. Global north countries plowed money into their economies during the pandemic and faced with this surging demand, lockdowns in China, and the small matter of war in Ukraine, a bad situation is getting worse.

Hedging your bets against a recession? The clock is ticking, and Powell knows it.