The U.S. Commerce Department’s Bureau of Economic Analysis released data today showing the economy grew 2.1 percent in 2022. CEI Senior Economist Ryan Young credits the Fed for doing its part to help, Congress not so much.
Statement by Ryan Young:
“The economy continues to grow despite fears about the Fed’s inflation-taming efforts. Part of the reason is that the Fed’s heavy lifting is already done. It ended its massive bond-buying program last March, and month-to-month inflation has been at normal levels since July. While the Fed will likely raise the federal funds rate again next week, it will be a gentler increase than before. Not only is the Fed almost done raising rates, they remain below the year-to-year inflation rate, so the real rate is still negative.
“With both GDP and employment in good shape despite all that, there is good reason to believe the inflation comedown will not spark a recession. What we’re seeing is the third act of the COVID economic story. The economy was in mostly good shape going into COVID. Then Washington’s spending and monetary excesses raised inflation for a while. Now we’re coming out the other side. Because the economy was in good pre-COVID shape with no financial crises or housing bubbles, it makes sense that it is healing well from the COVID shock.”