Good morning.
New Year’s predictions are a fool’s game, certain to be undone by events unexpected in January (like Putin’s invasion of Ukraine.) But I’ll play the fool, and take a stab:
—Mr. Market has it wrong. The idea that interest rates are near their peak defies history. There is no precedent or theory supporting the notion that you can conquer inflation with interest rates below the rate of inflation. And Jay Powell won’t cave. As my friend Greg Ip puts it: Every central banker wants to be the next Paul Volcker; no central banker wants to be the next Arthur Burns. I won’t be surprised if the Fed funds rate passes six percent this year. And that portends a tougher economy than most expect.
