In a deja vu moment, the Federal Reserve’s swift rate cuts raise unsettling parallels with the inflationary misstep of the 1970s. Back then, premature optimism led to soaring inflation after initial rate reductions. Today, historical cues point to rising unemployment during rate-cut cycles, contradicting the Fed’s sanguine predictions. The specter of a challenging economic future looms large, emphasizing the importance of cautious policy navigation.
The Fed is making the same error as the mid 1970s.
In the 1970s they also thought they had beat inflation in 1974-1975, they lowered rates and then inflation roared back to even higher levels in the late 1970s.
Inflation on came down in early 1980s because of two factors.
— Wall Street Mav (@WallStreetMav) December 14, 2023
According to Reventure, here is the rate cut to unemployment rate spike time by recession.
This is not the first time the Fed has called for a soft landing.
Can the Fed defy history and achieve a soft landing?
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— The Kobeissi Letter (@KobeissiLetter) December 14, 2023