The Federal Reserve and the White House are responsible for inflation

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SCHENECTADY Neither the supply chain nor the war in Ukraine has caused the current high inflation or the prospect of a recession that the country currently faces.

Instead, it was the Federal Reserve’s loose money policies combined with the Biden administration’s ‘mega-stimulus’ spending that led to the current state of the US economy, Hugh Johnson said. the capital region’s leading financial analyst and economic forecaster.

It was an increase in the money supply.

Johnson, founder of Hugh Johnson Advisors, delivered his annual outlook presentation to members of the Capital Region Chamber of Commerce at the Rivers Casino and Hotel on Thursday.

Johnson’s speech is an annual business class tradition in the area and, as he has done before, he began with a few jokes and a brief slide show highlighting his grandchildren.

Then he got serious.

Addressing a packed house, Johnson offered a stern rebuke.

The Federal Reserve and the federal government in Washington made a mistake, Johnson said.

While supply chain issues and Russia’s invasion of Ukraine fueled it, the current 8% inflation rate is due to the huge sums of money the Fed, through Low interest rates, and the Biden administration through stimulus checks, have poured into the economy, he said.

Now that the economy has deteriorated, the Fed has raised rates, taking money out of the economy, which it hopes will reduce inflation.

The question is, can they avoid a hard landing with these rising rates?

Most people are skeptical, he said, noting that pessimism about the economic outlook is at near historic highs.

Johnson conceded that, like many economists and analysts, he did not predict the impending recession or high inflation rates when discussing the outlook last year.

And while predicting a decline in employment, he did not believe the country was on the verge of a recession and so gave himself a C grade for last year’s prediction.

What went wrong? How did everyone, including us, miss the inflation rate? He asked. Even Federal Reserve Chairman Jerome Powell didn’t understand how inflation hung on, despite his earlier assertion that the price hike was transitory, Johnson said.

Despite this harsh assessment, he offered a note of hope.

The stock market is now in the 11th month of a bear market. And the average bear market in recent years lasted 15 months.

For 2023, Johnson thinks a recessionary economy and higher unemployment will take hold in the first two quarters.

After that, however, he thinks the federal government will forgo its interest rate increases.

There will be a lot of pressure on them to take their foot off the brake, he said.

This announced easing of rates should lead to a recovery in the second half of 2023.

It was a tough year, he said. “Now we have to get back on horseback.

[email protected] 518 454 5758 @karlin_rick

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