Last week the Federal Open Market Committee (FOMC) meeting held few surprises. We got another 75 basis points hike on interest rates and no forward guidance on when they’ll taper their hiking regime.
How much they hike, or how long they hike, isn’t what matters.
What matters to everyone is how long they’ll have to keep rates at an elevated level, whatever that level is, to subdue inflation down to the 2% annual level they’ve identified as acceptable.
By my calculations and analysis, they won’t get it anywhere near 2% for at least a year. That matters because the longer rates are elevated – especially if we’re talking months, quarters, or longer – the worse the economic hit is going to be. And when that hit comes, registering in higher unemployment, dampened demand, and a hard-landing recession, the stock market could selloff by another 25%.
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