When the Stimulus Hangover May Hit
Number of the Day: The most relevant or interesting figure in personal finance
That’s the year we’re likely to start feeling “payback” from the government’s pandemic stimulus efforts, as one investment strategist put it.
Between the three major rounds of federal relief approved by Congress and the Federal Reserve lowering benchmark interest rates to virtually zero, policymakers have effectively been using a firehose of money to fight the economic shock of the pandemic, propelling what’s predicted to be a massive rebound.
But everything comes full circle, and by 2023, the economy may have more than righted itself, leaving rising inflation among the headwinds forcing the Fed to raise interest rates once again, Jeffrey Kleintop, chief global investment strategist for Charles Schwab, wrote in a commentary this week. Cutting off that easy money will in turn slow economic growth, he said in an argument made by many economists and strategists.
“2023 has been called out as the year of the payback by policymakers in the U.K., U.S., and Europe,” Kleintop wrote, noting at least this means any current worries are premature.