“Go back to the type of pain Paul Volker had to impose on the U.S. economy to ring out inflation. He had to take the unemployment rate above 10%. The only way we’re going to get there is if the Fed under Jerome Powell sticks to his word, stays focused on discipline, and gets that real Federal funds rate into the restrictive zone.” – Stephen Roach, Yale University economist
USAGOLD note: Roach, former chairman of Morgan Stanley Asia, says the impact from tightening has not yet begun to be felt. He says that the current difference between headline inflation and the fed funds rate is nowhere near the restrictive zone, which he sees as 5% to 6%. Too, in projecting these numbers, he is assuming that we have reached the peak in inflation and that it is now headed back down – a still iffy proposition.