The Federal Reserve Moving Too Fast?

After determining that inflation was not transitory, the Fed declared war. And they have backed up their words with a historic pace of rate increases, as they matched their actions with strong words concerning their determination to do what it takes to reign in cost increases. They have even intimated that their actions may cause a recession and they are okay with that course of action to get the job done.

But a growing number of analysts are worried that the Fed is moving too far at too fast of a pace. The reasoning for these concerns is that rate increases take time to trickle down to the economy. Some say it takes a few months, others say it takes even longer. Thus far this year the Fed has raised short-term rates by 3.0%, with the pace of increases accelerating as the year has gone on. Thus, they are leaving no time for the economy to react.

This week and next week will be very busy. This week we have the first measure of economic growth for the third quarter of the year. Next week the Fed will meet again with the markets predicting another rate increase. At the end of next week, we will see the October jobs report. That is a lot of happenings that will go a long way in determining the future course of the Fed. And just in case you think that things will quiet down in November, the following week is Election Day!