Dry Powder: The Private Equity Podcast
Macro Update: Are We Out of the Woods Yet?
Sep 14, 2023
Host interviews Karen Harris to discuss the effectiveness of the Fed in controlling inflation and the role of financial markets in disinflation. Analyzing the stability of prices and uncertainty in inflation. Exploring interest rates and investor reactions. Assessing the state of the US economy and its ability to withstand rate hikes. Monitoring the macro situation and finding deals.
17:20
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Quick takeaways
- The decline in core inflation can potentially be attributed to factors other than the Fed's actions, such as the financial markets.
- The stability of prices remains uncertain, with the potential for a second wave of inflation or deflation, leading to uncertainty about future interest rates.
Deep dives
The Fed's Role in Inflation
The podcast discusses how the Fed's actions have influenced core inflation. The speaker analyzes a super core inflation metric, which excludes volatile sectors and lags. This measure has fallen to 0.5% annualized over the past three months, the lowest it has been since 1990. The speaker questions whether the Fed can take credit for this decline in inflation or if other factors were at play, such as the financial markets. The timeline suggests that the economy engineered its own soft landing after an overheated 2021, triggering a contraction, allowing for disinflation.
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