Who truly decides whether the economy will recession? Many people's first reaction is the Federal Reserve Chair, but I think the answer is actually inflation itself.

On the surface, the Federal Reserve controls interest rates, but in reality, its operational space is much narrower than imagined. The 2% inflation target and full employment are two hard indicators that restrict its options. Rather than actively guiding the economy, the Fed is more passively responding — the data is right there, and it can only play by the rules.

If inflation remains stubbornly high and stays above the target for a long time, even if the Fed wants to loosen monetary policy, it has to weigh its options. At such times, the probability of a recession has already been scripted by inflation data.