Report
Federal Reserve policy: The 2018-early 2019 episode is worth keeping in mind
In 2018 and early 2019, the Federal Reserve was faced with an economy at full employment and strong growth, and as a result decided to move to a more restrictive monetary policy: raising short-term interest rates, reducing the size of its balance sheet. Despite a very strong economy, this restrictive policy had very negative effects: Marked rise in long-term interest rates; Falling share prices; Widening credit spreads; Declining growth; and, as a result , the Federal Reserve had to return to quantitative easing in mid-2019 despite full employment. Now , in 2022, the US economy is markedly weaker (sharp reduction in the fiscal deficit, falling real wages), and it is therefore unlikely, given the unfortunate experience of the past, that a truly restrictive monetary policy will be implemented in the United States.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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