Kansas City Fed Warns Against Abrupt Rate Hikes As 'Bullwhip Effect' Frustrates Economists

A quick definition of terms amid the ongoing impact of horrific White House Policy . . .

“The bullwhip effect is a distribution channel phenomenon in which demand forecasts yield supply chain inefficiencies. It refers to increasing swings in inventory in response to shifts in consumer demand as one moves further up the supply chain.”

A practical example . . . 

“Research indicates a fluctuation in demand of 5% will get interpreted by supply chain participants as a 40% change in demand. Much like cracking a whip, a small flick of the wrist, change in demand. can cause a large motion at the end of the whip – manufacturers’ responses.” 

And all of THAT might earn consumers a few discounts and then cost MILLIONS their jobs at the outset of our current recession.  

Now, here's the word from one of the smartest people working in Kansas City . . .

 "The speed at which interest rates should rise...is an open question," she said in remarks made as several of her colleagues have already endorsed a second consecutive three-quarter point increase at the upcoming July Fed meeting. Kansas City Fed president Esther George dissented against an increase of that size in June, preferring the half-point increase the public was expecting until the weekend before the meeting.

"The pace at which this path unfolds will need to be carefully balanced against the state of the economy and financial markets," George said in what amounts to the bluntest warning yet from a policymaker that the central bank may be at risk of overdoing it.

Read more via www.TonysKansasCity.com links . . .

Kansas City Fed's George warns "abrupt" rate changes could strain economy By Reuters

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A potential economic recession and the supply chain bullwhip are colliding

Subtext: Supply chains are experiencing a massive bullwhip from the COVID economy and have built up massive inventory levels. A slowdown in consumer spending caused by inflation and a potential recession will have a massive impact on freight demand and prolong an inventory drawdown.

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Developing . . .