text: Key Takeaways:Fed decisions on interest rates remain most influential for recession expectationsInterest rates far above neutral will crush demand and induce a recessionToo few hikes from the Fed could result in runaway inflationSupply chains continue to experience challenges, now renewed Chinese lockdownsA recession may not be catastrophic but will occur nonetheless, according to several ‘smart money’ individualsConcerns emerging over the Fed acting to rectify its reputation instead of taming inflationPhiladelphia Fed President Patrick Harker wants to end 2022 at or above 3% ratesFed Chair Powell expects the effects of Chinese lockdowns to worsen; Fed needs to reduce demandJuly FOMC meeting expected to increase interest rates by 50-75 basis pointsSt. Louis Fed President James Bullard says to expect continued volatility everywhereINSIDE THE BELTWAYWHITE HOUSE: Nothing Significant to ReportCONGRESS: The Senate Foreign Relations Committee will consider Senate Resolution 623, which calls on the Secretary of State to designate Russia as a state sponsor of terror. The House Foreign Affairs Committee is meeting to edit a draft of the U.S.-China Economic and Security Review Commission’s 2022 report to Congress.DOMESTIC INTSUMGUNDLACH: INFLATION TO REMAIN HIGH: DoubleLine’s Jeff Gundlach believes the Federal Reserve is being unrealistic with their public inflation expectations. “The inflation rate is so high, and the idea that it’s about to come down to anything close to the 2% level is completely out of the cards. Our model at DoubleLine is looking for an inflation rate to stay 8-handle now, for a couple more months, maybe even print a little higher based on the fact commodity prices got even more elevated, particularly energy. And so, by year-end, we might get inflation down to the high 6s.” Gundlach says Powell needs to “paint or get off the ladder” if he wants any chance at restoring the credibility of his word and the Fed, which right now remains “shaky.” On the economy, “it’s very possible that we see some sort of a blow-up,” said Gundlach. “The dollar is going to fall very sharply in the next recession… Once recession comes, I think the Fed will go to zero [interest rates] pretty fast, and so that would be the moment that the dollar rolls over,” Gundlach said. (AC: Today’s high inflation could be just the first wave of multiple rounds, like the U.S. experienced during the Great Inflation from the late 1960s to the early 1980s. Additionally, we’ve seen indicators that the dollar’s strength relative to global purchasing power could reverse once the Fed begins cutting interest rates. That could send inflation to a new peak next year, or whenever the Fed’s rate cutting cycle begins. I doubt we’ve seen the worst of inflation yet. – M.S.)MAERSK: SHIPPING COSTS ‘UNLIKELY TO ABATE SOON’: Global shipping giant Maersk reported that the cost of shipping is “unlikely to abate in the short term.” Maersk’s head of Ocean and Logistics, Vincent Clerc, said that “more inflation [will] come through in the years to come,” adding that labor and energy pressures would lead to higher prices. (Analyst Comment: The picture I’m getting from these CEOs is that inflation is likely to remain high for years, even if the Fed declares victory in bringing down the rate of accelerating inflation. In previous weeks, we noted the number of American food product and retail CEOs continuing to raise prices due to higher input costs.- M.S.)