After nearly two years of talking about inflation, Federal Reserve Chair Jerome Powell is now invoking the term disinflation. "Literally, that means a decrease in the amount of inflation," says KTRH Money Man Pat Shinn. "So think of a car that's going 100 miles an hour and now slows down to 65 miles an hour...so we're still getting inflation, but at a much slower rate."
That slower rate of inflation has seen the annual rate fall from over eight-percent last summer to just over six-percent now---which is still well above the Fed's target annual rate of two-percent. And with uncertainty over how long this round of high inflation will last, the Fed finds itself walking a tightrope to control inflation with rate hikes while keeping the economy from tanking. "They don't want to give the all-clear signal just yet, and have a big market rally which would trigger more consumer spending, and of course more inflation," says Shinn. "They would rather err on the side of tightening too much, and then they can come right back and start cutting rates if they need to."
What all of this means is we can expect the current rate hike trend to continue for the time being. "The market is pricing in that we've got at least two more rate hikes, even though the Fed is continuing to talk tough," says Shinn. "And right now, the Federal Reserve is telling us that once they stop raising rates, they anticipate leaving them at this higher level throughout the end of the year."
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