Late last month, the Federal Reserve announced the latest incremental raise in its key interest rate, pushing it to the highest level in 22 years, as it continues to battle what it calls persistent inflation.
Dan Walters
CalMatters
Opinion
The increase, a quarter of 1%, renewed the debate among economists and politicians over whether the Federal Reserve’s anti-inflation actions will slow the economy into what’s termed a “soft landing,” or ignite a recession.
The recession that many economists thought would have happened by now hasn’t raised its ugly head, leading to I-Told-You-So’s from the ones who hadn’t seen a downturn on the horizon.
“Much to the chagrin of those who have been predicting otherwise, the U.S. economy has stubbornly continued to grow and 2023 is shaping up to be a better year than 2022,” one of the optimists, California economist Christopher Thornberg wrote recently.
“This isn’t to say that we don’t recognize signs of stress in the economy driven by higher interest rates and the recent bout of inflation,” Thornberg continued. “Rather, we’ve never viewed these issues as rising to the level of being systemic given that they were caused by the same thing that has kept consumer spending supercharged – the excessive stimulus thrown at the economy during the pandemic.
“The greatest risk, as we have seen it, was always the undue tightening by the Federal Reserve, which was implemented in response to their original sin of excessive loosening.”
Dan Walters has been a journalist for nearly 60 years, spending all but a few of those years working for California newspapers. He began his professional career in 1960, at age 16, at the Humboldt Times. CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more columns by Dan Walters, go to calmatters.org/commentary.
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