Interest-Rate Pain From Higher Inflation Has Barely Begun

This is the first tightening cycle since the early 1990s when inflation started out well above the Fed’s objective. 

To push it back down would, in theory, require substantially positive real rates.

Popular rules of thumb inspired by the economist John Taylor prescribe a nominal rate target of 7%, according to a June Fed report, about double current expectations.

That would be a rude awakening for markets.


Greg Ip WSJ 20 July 2022 

https://www.wsj.com/articles/interest-rate-pain-from-higher-inflation-has-barely-begun-11658327626






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