Uncomfortable place
- Gustavo A Cano, CFA, FRM
- 11 minutes ago
- 1 min read
When the FOMC meets on Tuesday and Wednesday, they’re going to discuss the state of the economy and wether there needs to be a monetary policy adjustment. It’s discounted by markets that no action will be taken this week, but words on the official statement and during the press conference will matter. In the chart below, you can see an executive summary of the economists expectations on the US economy: lower growth, potentially a contraction, with an increasing risk of higher prices, due to tariffs. That’s what people like the voting members of the FOMC are seeing now. That’s called stagflation, and every economist knows it is a very uncomfortable place to be, because you can’t get out of it lowering rates or printing money, because you push goods prices up. That’s also a scenario that changes the political landscape. No one votes for a Congress in midterms, or for a President, when the economy does not grow, and potentially job losses increase, while the cost of living is higher.
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