February 14

2/14 – Looking at the economic storm clouds: Covid, supply chain issues and tight labor markets are carrying over into 2022. But this year we can add 2 more growth killers: rising interest rates and high fuel prices. Jan’s CPI came in at a 40-year high of +7.5%. That guarantees the Fed will begin raising interest rates in March, with 4 to 7 quarter-point increases likely this year. That still leaves the federal funds rate at 2.0% or less. But rate increases are like economic chemotherapy – you hope to reduce inflation without killing the economy. And nothing cuts into household budgets more than rising gasoline prices. AAA said the average price for regular was $3.47 last week, up a dollar per gallon (+40.5%) from a year ago. Blame it on surging demand, less fracking, tight storage supplies, too-slowly increasing OPEC production, and the prospects for Russia/Ukraine disruptions/sanctions.