Lesson in Lag Time
There’s still a lot we don’t know about how monetary policy works, and perhaps more crucially, when it will work. The Federal Reserve has been tightening for about six months now and inflation still doesn't seem to be budging.
Today inflation expectations are clearly unanchored. The Fed keeps saying inflation will be back to 2% but so far it's not
The bond market has a terrible track record predicting inflation. If history is any guide, bond traders are the last to know when inflation is about to change.
While interest rates seem high compared with recent history, they are actually still too low to have a big impact on economic activity. The rate that matters is the Fed's policy rate minus inflation
We may be in store for another several months or even a year of high inflation accompanied by more rate increases before the Fed’s policy has any real impact on much of anything. The day we can start talking about interest rates coming down is still a long way off.
Allison Schrager Bloomberg 18 oktober 2022
Kommentarer