“So yeah, I think the Fed is going to have to hike quite a bit more,” says economist Dr. Kevin Hassett to Joe Kernen.  “Deficit Spending… is just absolutely insane.”

Dr. Hassett’s Taylor Rule calculation output is 7% while Dr. Taylor’s – whom the rule is named after – is around 6%.  The Taylor Rule basically says the Fed should raise rates when GDP or inflation is above trend and lower rates when it’s below. Dr. Hassett says there is no way inflation is going down with a 30-40% chance of Q3 real GDP growth above the interest rate.  And this is in addition to, “deficit spending that is just absolutely insane.”  He continues saying that if government spending is an extra 5% of GDP and nominal GDP thereby goes up by 5% with no additional supply, why wouldn’t inflation go up?  It will occur in waves like a sawtooth on a graph.