Well, you can forget about a soft landing. Fed J. J. Pale is now aiming for something much more painful for the economy, to put an end to elevated inflation. This is the subject of a column with my Richard Miller Bloomberg Economics Report, and he joins us. Now, Richard, so what's what's going to be more painful? Well, it's something trying not to laugh at something that economist called a growth recession. Right, it sounds like an oxymoron, then I
guess it is. But what it is is the growth slows down to basically to a crawl, and unemployment rises, and then you slowly slow and you have that for a while, like a year maybe more, and you slowly ring this inflation out of the economy. It's it's like we got an economist in the story quota As saying, it's like you know, dripping water torture. Um, but you know the economy never goes south, never goes into a contraction. Yeah.
Well yeah, that's Diane swanksline right right exactly. Um, this is a pretty negative period if your long equities one would think it sort of reminds me of once it became painfully obvious that Chinese officials just didn't feel comfortable with the size of big tech players in China, and you'd get these, you know, a couple of days where you'd get some positive news, but it was always slammed. It feels like the FED is slamming risk assets now and it really wants you to know that, uh, if
you fight the FED, you'll lose. Yeah, I mean, I mean that's a good point. I mean, basically, it suggests that they're just gonna keep They're gonna raise interest rates up to a pretty high level, at least high compared to where we wove been most recently, and just hold them there. And even if growth slows and then the market's waiver, they're just going to keep, you know, keep the screws on until I get you know, what they
want on inflation. So you're right, it does not sound like a an attractive time to be, you know, uh, risk. It certainly doesn't sound like a risk on time. And the other danger is, of course, when you're growing so slowly, it doesn't take all that much to knock you actually, you know, in south and into an actual recession. So, you know, another another run up in oil prices or you know anything. So you know, you're you're, you're as you say, it's not it's not necessarily conducive to taking
a lot of risks. Yeah, this is said, I mean exactly. And you want to get slow growth down to below its potential, which I think some people have pegged that at one point eight per cent, as you've alluded to. As you also, you can easily easily miss that and go directly below and into contraction territory. And it's is
it really at the moment, almost like Russian roulette. Yeah, it's, you know, it's it's it's certainly not an easy thing to do, right, I mean, you know, uh it somebody said, is you know, like they trying to Someone said they're trying to you know, thread and needle in the dark
with you know, with oven mits on. You know, I mean, this is you know, a pretty pretty difficult thing to pull off with as you say, not making a misstep, and and and the on the other side is if they don't get the slow growth, and the inflation stuck you know, keeps highing higher than they want, so they're kind of you know, stuck but rich. If if you abandon the soft landing it's not that difficult. You just have to get you know what I mean. I mean, you just have to get the FED funds rate in
a restrictive mode so higher than inflation. This is what Vulker did you know back in in uh in the early eighties. Um, it's just that, you know, you you sort of want to have a FED that seemingly has the power to pull off a FED a soft landing and give both investors and workers and companies the hope that this could happen. But it seems like that's abandoned now. Yeah, I mean I think it's you know, they held out that out for a while and um, but they're coming
around to the view that it's it's not realistic. You know that this can't be done. You can't get rid of this inflation. Yes, some of it's gonna melt away when you know, uh uh, when you know, you know, the chips chips makers start pumping out more chips, et cetera. But you know there's there there's enough underlying momentum to inflation that it's not going to melt away without some pain.
You know. That's what and that's what basically saying. You know, it's not going to be this soft gentle landing where you know, everything is called pathetic. It's it's gonna be, you know, this growth recession where you're gonna have you know, you know, you're gonna be growing, but it's not gonna feel very good. The thing is also what complicates it is perhaps an arguably quantitative tightening. What do you make of that region? I'm sorry, I didn't I didn't quite
get that right, oh qt. Oh yeah, I mean, um, that's a good point. I mean yeah, they themselves admit they're not quite sure how this is gonna, you know, work out. They're hoping that the markets have already you know, discounted the quantitive quantity of tightening and playing down its impact. But you know, when you talk to them, they say, look, you know, we only did this once before. Uh, we didn't do it anywhere near the size we're about to do it. We don't really know. Rich Thanks very much,
interesting story. Richard Miller, Bloomberg Economics reporter,