Markets do not yet believe we’re out of the woods as debates about whether inflation has peaked continue while the Federal Reserve (Fed) stands ready to aggressively hike its target interest rate over the next few months (at least) while shrinking its bloated balance sheet. But there have been some encouraging signs lately:
Also, consider the evidence that consumers are in pretty good shape overall heading into the latest inflation surge:
The good news is that if the economy does contract to the point where it is officially labeled a recession (the National Bureau of Labor Statistics makes that call), the impact will likely be muted somewhat by the strong financial position enjoyed by consumers heading into it. Keep in mind that two straight negative GDP quarters is not sufficient to “qualify” for a recession. NBER’s broader definition will likely enable the economy to avoid recession in the first half regardless, though GDP may eke out a small gain anyway.
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