THERE WILL BE PAIN

Now we know where the American economy is headed. More precisely, we now know where the Federal Reserve Board’s monetary policymakers believe they are taking us.

Chairman Powell has warned there will be pain to drive inflation out of the system, and he now offers the Fed’s view of just how much. Last week he raised the Fed’s benchmark interest rate by 0.75 per cent, and in effect announced 1.25 per cent in additional increases this year, in two tranches. That would bring the key interest rate to 4.4 per cent at year end, about where it was at the end of 2007, and within the 4.0 and 4.5 per cent range to which most of the members of the 12-person policy committee expect to raise rates by year-end, before moving to 4.6 per cent at the end of 2023.