July 2022 Mid-Month Update: Tipping Into A Recession

When we started the month of July, there was speculation about the Fed raising interest rates anywhere from 50 basis points to 75 basis points during its July meeting. With the June 2022 inflation number coming in at a shockingly high 9.1%, that narrative has now shifted to a Fed rate hike of anywhere from 75 basis points to a full percentage. A 1% rate hike was unthinkable just a few months ago but so was a 9.1% CPI increase. The price action this month in commodities and currencies indicate that the Fed is very likely to push us into a recession and by some estimates, we are already in a recession. Q1 2022 GDP declined by 1.6% and the latest estimate for Q2 GDP that was released by the Atlanta Fed yesterday puts us at a 1.5% decline. If the Atlanta Fed is correct, it implies two quarters of negative GDP growth, which is the working (but not official) definition of a recession. Atlanta Fed Q2 2022 GDP Forecast Commodities and especially oil had held up well during the first half of this year but this fear of a deep and long recession is putting...

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