Powell said:
“The worst thing we can do is to fail to restore price stability because the record is clear on that. If you don’t restore price stability, inflation comes back, and you can have a long period where the economy is just very uncertain, and it’ll affect growth. It... can be a miserable period to have inflation come constantly coming back and the Fed coming in and having to tighten again and again.”
Thus, with Powell keen on avoiding the mistakes of the 1970s, the soft landing narrative should disintegrate as the inflation fight continues. For example, the National Association of Homebuilders (NAHB) released its Housing Market Index (HMI) on Sep. 18. The report stated:“All three major HMI indices posted declines in September. The HMI index gauging current sales conditions fell six points to 51, the component charting sales expectations in the next six months also declined six points to 49 and the gauge measuring traffic of prospective buyers dropped five points to 30.”More importantly, the drag was driven by higher long-term interest rates, which we warned were the key ingredient for a recession. And with the rate surge still ongoing, the situation should worsen and help push gold off the recessionary cliff.
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