After we curb inflation, then what?
We have lost sight of this question over the last year or so, caught up in the drama of a price spiral unprecedented in most of our lifetimes. But whether the Fed has crashed the economy into a recession or still manages to engineer the soft landing, we are likely to emerge from this episode into a difficult economic landscape that presents problems with no straightforward solutions.
It does appear we are on the way out. Investors in bond markets are expecting inflation to moderate in a couple of years. Despite hiccups in China, global supply chains seem to be recovering from the pandemic shock. The Fed is raising rates pretty furiously and the last vestiges of the enormous rounds of fiscal stimulus to demand are waning, trimming personal savings. Job growth is slowing.