Fed is entering a period of maximum danger in inflation fight

The US Federal Reserve is clearly determined to bring down inflation. But no one really knows how high it will have to raise its policy interest rate – and how long it will have to keep it there – to achieve its objective. Many are thus wondering whether the Fed will bring on a recession.

US Inflation is coming down, partly because snags in supply chains have been sorted out, but also because demand is weakening. Higher interest rates have slowed home purchases, and hence housing construction. Higher-priced goods and services have eaten into household budgets and impeded consumer spending. And China’s anaemic growth has dampened commodity prices globally.

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