The Fed is giving Americans a harsh lesson in monetary lags3 min read 19 Oct 2022, 11:20 PM IST
Its rate policy isn’t like flipping a switch and will take long to work
To state what is now especially obvious, there is still a lot we don’t know about how monetary policy works, and perhaps more crucially, when it will work [as in, take effect]. The US Federal Reserve, in charge of monetary policy in America, has been tightening financial conditions for about six months now and inflation still doesn’t seem to be budging. At least some things are clear: This bout of inflation is not transitory—it has plainly seeped into the bones of the economy. This makes knowing when the US Fed’s policy will begin having a noticeable effect even more unpredictable. Markets seem to expect the Fed to start easing next year, but Fed officials have been adamant they will keep rates high and keep raising them until inflation comes down. So, when will that be?