Investors around the world remain primarily focused on inflation. Globally, central banks are aggressively increasing interest rates to tamp down the highest inflation we have experienced since 1981. The COVID pandemic famously precipitated an unprecedented government response with the injection of trillions of dollars of monetary and fiscal stimulus. With all that money sloshing around the world's economy, combined with extraordinary pent-up consumer demand resulting from lockdowns, supplies of inventories quickly dwindled and prices have been rising ever since. The challenge facing the global central bankers was underscored when Jerome Powell recently told a European Central Bank forum in Portugal, "We now understand better how little we understand about inflation". Recently Powell has acknowledged the U. S. Federal Reserve Bank is prepared to continue increasing interest rates aggressively through year-end to slow down the economy and increase unemployment, at the risk of recession. We believe a recession is more probable than a soft landing for the economy. Despite the low unemployment levels, that recession may have already begun.
