Fed will beat inflation with recession, housing market will be sacrificed
The effects of monetary tightening by global central banks to curb inflation are starting to show, with the M2 money supply in the U.S. decreasing by 1.4% annually in December 2022, the first time since records began in 1960. But today we still have negative interest rates and the Fed will not stop raising rates until Powell creates a recession and the unemployment rate starts to rise. The real interest rate is the interest rate that investors, depositors or lenders receive (or expect to receive) after taking inflation into account. Referring to the Fraser equation, the real interest rate is roughly the difference between the nominal interest rate and the inflation rate. If investors are able to lock in an interest rate of 5% for the coming year, and banks expect inflation in the U.S. to be 2%, they will receive a real interest rate of 3%. If the economy is at risk of recession, or if a crisis hits, the central bank often cuts interest rates in response; when the economy resumes growt