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Friday, February 11, 2022

Credibility And Reputation 

The Federal Reserve is faced with hiking interest rates dramatically in order to regain its "credibility and reputation."  Its relationship with the public is its power over the money supply.  With inflation running out of control, the Fed must do something to corner it or the economy will go sour with ever-increasing prices for goods and wage inflation.  However, the Fed doesn't want to tap the brakes too vigorously and cause a recession. Its increases must be delicate but firm -- ramping down public expectations but not too much. The question is how much is too much and the answer is no one really knows. The collective minds of the governors have to come to a consensus and hope their view of the economy is right. It is a tough position to be in.  


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