The case against aggressive rate hikes

Plus: Putin's power fades. [Bloomberg]( Follow Us [Get the newsletter]( This is Bloomberg Opinion Today, a raccoon invasion of Bloomberg Opinion’s opinions. [Sign up here](. Today’s Agenda - The [Fed is causing problems]( for the world. - Putin is [projecting weakness]( at home. - The pandemic [changed parts of the economy]( forever. - China’s economy [isn’t looking so hot](. Animal Farm: Fed Edition From a certain perspective, the US using massive interest-rate hikes to solve its inflation problem is a little like you releasing hungry bobcats throughout your neighborhood to get rid of the raccoons in your attic. Also, you have special bobcat defenses and your neighbors don’t. The bobcats may or may not take care of your raccoon problem, but they will definitely give you a lot of scared, angry neighbors with missing pets. The Fed’s inflation campaign is boosting the dollar, Marcus Ashworth writes, but that necessarily means [it’s crushing other currencies around the world](. Other central banks are raising rates too — some people just have to keep up with the Joneses, whether that means installing an in-ground pool or raising interest rates or releasing murderous bobcats — compounding the damage being done to the global economy. Is all of this necessary? Perhaps. John Authers passes along a heartwarming Wall Street research note comparing the Fed’s campaign to the time a [zoo decided not to let an abandoned polar-bear cub die](. Some argued the zoo should let nature take its course, and to hell with the adorable cub. The Fed is those people. Sometimes to make a deflationary omelet you have to kill a few baby bears. But there’s a limit. After the latest shockingly awful CPI report, markets are starting to think the Fed will raise its target rate by a full 100 basis points at its next meeting. This would be a little like releasing murder clowns to fight the raccoons because the bobcats weren’t acting fast enough. As Bob Burgess points out, [this would signal panic and possibly break something]( in the financial system. It will certainly further stress out a fragile global economy. Even with strong defenses, those murder clowns will end up in your basement. Again. How to Lose Friends and Not Influence People: Vladimir Putin Edition There’s a [scene]( in “The Sopranos” (content warning for smoking, violence, gabagool) in which Tony, fresh out of the hospital and needing to reassert his dominance, viciously beats down a beefy young henchman while the rest of the crew looks on in horror and respect, getting the point. Tony then retreats to a bathroom and vomits. Such is the life of gangsters and autocrats. [Vladimir Putin’s hold over Russia]( derives not only from his grip on the country’s vast political and security apparatus but also all those shirtless horseback rides and bloodthirsty attacks on weaker countries, Leonid Bershidsky writes. His projected strength is a self-fulfilling prophecy. But now that his army is getting its зад handed to it in Ukraine, much of the rationale for keeping him in power is evaporating, Leonid writes. Putin may not be ousted any time soon, but his henchmen are starting to think about it. Ian Buruma argues [sanctions will never turn Russia’s citizens]( against their leader. At the rate the war is going, they may not need to. Putin is even a beta among fellow dictators. He was forced to [admit]( today that his would-be BFF Xi Jinping had “questions and concerns” about his civilian-butchering tour of Ukraine. And [the US has leverage to drive the two even further apart](, Bloomberg’s editorial board writes, offering some specific tips. Of course, even damaged gangsters can still intimidate. [Germany doesn’t want to give Ukraine the Leopard tanks]( it needs to keep pressing its recent advantage, Andreas Kluth writes, for fear of how Putin will respond. But this would be the worst time to stop exposing his weaknesses.  The New Economic Normal The thing about any major change — new job, divorce, devastating raccoon war — is that you might still be “you” when it’s over, but you will also be a different person. You can never ride the [Ship of Theseus]( in the same river twice, or something. If the Covid pandemic had lasted a couple of months like we hoped back in March 2020, then the global economy it left behind would probably not have changed noticeably. As it was, the pandemic lasted 475 years, and [parts of the economy will simply never be the same](. Allison Schrager helpfully breaks them down. Some changes may slowly reverse with time, such as the 474-year-old supply-chain problem: Others, such as higher inflation and remote working, will likely be with us indefinitely. That’s not to say inflation will be an emergency forever. But it probably won’t get back to less than 2% in the foreseeable future either. And maybe, as is often the case with uncomfortable changes, we’ll come to prefer that in the long run. Telltale Charts After a series of forecast downgrades, economists now expect [China’s economic growth to be among the slowest]( in decades this year, Javier Blas writes in the latest Elements newsletter. Further Reading A new study reveals how [air pollution can foster lung and other cancers](. — Lisa Jarvis It’s too hard for many former [British colonies to change their constitutions]( to suit the times. — David Fickling [Nintendo’s popular squid game]( shows it can still innovate. — Gearoid Reidy and Tim Culpan Patagonia’s owner has [cut out the middle man]( between profit and charity. — Matt Levine ICYMI Florida and Texas [used immigrants in political stunts]( to own the libs. China’s effort to [steal GE’s secrets]( backfired. These US [housing markets are at biggest risk]( of price declines. Kickers Global warming may [end San Francisco’s fog](. Chaos researchers can now [spot tipping points](. Startup aims to make [shoes out of bacteria](. Some WFH employees have [left the country](. Notes:  Please send bacteria shoes and feedback to Mark Gongloff at mgongloff1@bloomberg.net. [Sign up here]( and follow us on [Instagram](, [TikTok](, [Twitter]( and [Facebook](. Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. You received this message because you are subscribed to Bloomberg's Opinion Today newsletter. [Unsubscribe]( | [Bloomberg.com]( | [Contact Us]( [Ads Powered By Liveintent]( | [Ad Choices]( Bloomberg L.P. 731 Lexington, New York, NY, 10022