On March 8th, the CEO of Morgan Stanley said, “The Fed has to raise interest rates, and the Fed doesn’t want to send the economy into recession. If it puts the economy into recession, it will fall into stagflation, which is really bad.”
The Fed was definitely planning to raise rates by 50 points, but not now. I would be shocked to raise rates by 50 points because the Fed cannot afford to take courage in an environment of uncertainty. I think the Fed will raise rates very methodically.
The worst that can happen is that the war situation subsides, the world returns to some level of normalcy, inflation is staying high, and the Fed is not doing enough. That’s where it gets tricky.