Is Fed tapering when the next recession is just around the corner?

Heritage Capital President Paul Schatz is not somebody you would describe as an “inflation hawk.”

Inflation hawks think that the drastic measures taken by the Fed to jolt the nation out of its economic coma — including dialing short-term interest rates down as low as they can go, and spending trillions of dollars on an unprecedented buying spree of Treasurys and mortgage-backed securities — will ultimately backfire, devaluing the dollar and triggering runaway inflation.

Schatz says that should it rear its head, inflation is easy to keep in check. Although the U.S. economy has been growing for five years, it’s been growing very slowly by historical measures. By ending its bond-buying program in October and starting to ratchet short-term interest rates next year, Schatz argues that the Fed risks scuttling the delicate recovery.

Schatz is expecting one more “mild” recession in 2015 or 2016 before the economy is ready to stand on its own two feet. Fed tightening before then, he says, would be ill-timed. Source: