The latest CPI numbers came out showing that price inflation was 0.1% for March 2023. The year-over-year rate came down to 5%.

The median CPI came in at 0.4% for March, while the year-over-year now stands at 7.1%.

This was generally seen as good news by investors, although stocks couldn’t hold on to gains for the day.

It’s interesting that the market is still expecting another rate hike from the Fed, or at least it is slightly leaning that way. But the market is also expecting the federal funds rate to be lower next year than it is now.

So the market is expecting the Fed to hike, probably one more time, and then start lowering rates again later in the year. In other words, a recession is being anticipated.

The Fed Minutes and Blame

The latest FOMC minutes were released, and it wasn’t really good news, although it also isn’t unsurprising.

The meeting summary stated: “Given their assessment of the potential effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years.”

But let’s be clear on this. It isn’t fallout from the banking crisis that will throw the economy into a recession. The banking crisis is part of the recession.

Some of the same things that led to a banking crisis are setting the economy up for a recession.

There has been a heavily inverted yield curve for several months. We didn’t need a banking crisis to start to tell us that there is trouble ahead.

As with so many things, there is a confusion of cause and effect. Maybe the Fed is purposely inserting this confusion in order to blame the banking crisis and other outside forces on an economic recession instead of their own policies.

Playing Contrarian

The incredible thing is that the Fed is actually admitting there will be a mild recession. So if you are a contrarian, does that mean we should believe that no recession is coming?

I believe it’s the other way. The Fed is saying there might be a mild recession.

In this case, I don’t think the contrarian view is that there won’t a recession at all. It is that there won’t be a mild recession, but a massive recession.

The Everything Bubble is on the verge of implosion. The banking troubles that recently started are just the beginning.

It is not surprising that the CPI has come down a little bit. The Fed has been hiking its federal funds rate aggressively after being near zero. The Fed is popping the bubble in order to get some control of the price inflation that it caused.

To me, it’s clear there is a recession ahead. The banking crisis was just the beginning, and it isn’t the cause of what is to come.