Wilmington Trust Chief Economist Luke Tilley recently published an opinion piece on MarketWatch, challenging the prevailing view that the Federal Reserve (Fed) guides the economy. Instead, the Fed is more akin to the rear driver of a long-ladder fire truck, the tillerman, who is unable to guide the truck and merely responds to direction of the vehicle. The U.S. Federal Reserve is talking up rate-hike expectations even when inflation and threats to inflation are slowing markedly. Investors should recognize that the Fed has a poor forecasting record and officials are likely to relent on their hawkish rhetoric as inflation subsides. Once the Fed realizes which way the economy is turning, it will turn too.
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