Part 4/14:
A deep dive into macroeconomic signals reveals a complicated picture. Persistent inflation remains stubborn, with some indicators suggesting an environment of stagflation—a combination of stagnant growth and high inflation, which is considered a “kiss of death” for central banks armed with traditional monetary policy tools. This scenario eerily echoes the 1970s, marking a perilous threat to economic stability.
Interestingly, if the Fed chooses not to hike rates during its upcoming meeting, markets could respond positively, as investors often interpret such a decision as a sign of easing ahead. However, the overall economic environment remains challenging, with low GDP growth (only 1.6% in the first quarter) and inflation running well above target levels.