Inflation is a lagging indicator. Thats why the fed is in a tight spot. They raised .25 17 times to 5.25 and inflation looks more problematic now than it did during the last meeting. The problem is that inflation could be problematic well into the middle stages of a pronounced recession. But the risk of ignoring it and letting it get out of control are even more dire. The Fed took a slightly softer stance on more tightening to leave the option open to cut in order to head off a recession. Now here is something that bugs me. It’s the mentality to avoid a recession at all cost. Thats what got us into the mess we are in today. Greenspan lowered the Fed funds rate to 1% to head off the recession from the nasdaq implosion and the aftermath of 9/11. As a result we created a huge housing bubble. Now we are looking at $1.7 trillion of ARMS resetting and alarming rate of NOD’s and foreclosures. Lets just be honest we are going to have a recession, we actually need a recession as crazy as that sounds. Recessions correct the excesses of the previous boom. Notice the word CORRECT. Lets just take our medicine and get it over with. There are no shortcuts here. My fear is that they are going to inflate another bubble to ease the pain of this last bubble. The end result of this path wont be a recession but an all out Depression. IMO
