[RspecMAuthortah]

OK so what happens if the chip shortage lasts longer (due to war and commodity prices)and with plummeting sales and corporate earning (which will reduce tax receipts as well) the economy will enter recession? So then what is the game? Do Fed keep the economy in recession? Or do they start QE again?

[dragontamer]

> Or do they start QE again?

Why would they start QE? Fed rate is at 4% right now, there's more than enough room to drop rates if an issue occurs.

Given the data however, its unlikely to happen. We're currently at record employment levels. The expectation is for the rate to keep going up to maybe 4.5% next year, and finally that's when inflation is quelled, and we taper off rates sometime next year.

Of course, we need to keep up with economic data and see if these rate hikes have the desired effects.

[RspecMAuthortah]

> Why would they start QE? Fed rate is at 4% right now, there's more than enough room to drop rates if an issue occurs.

Right but that will also increase demand and induce more inflation, no? So Fed will be perpetually stuck, in theory at least, to find a balance in their dual mandates.

[randomdata]

The goal is equalize the demand with the supply. Keeping with the example, the hope is to see just as many iPhones sold, already limited by how many chips are available, but not with people fighting over them outbidding each other with higher and higher offers to obtain one.

A recession will occur if they overshoot, however.