Report
No “Volcker moment” in the United States today
Back w hen Paul Volcker was chairman of the Federal Reserve, US monetary policy became highly restrictive from 1981 to 1983 after initially not having been very restrictive despite the inflation that had resulted from the oil shocks. This resulted in very high interest rates, which drove down inflation at the cost of a severe recession. Like in 1981, could there now be a “Volcker moment” at the Federal Reserve, with monetary policy shifting from being not very restrictive, despite the surge in inflation, to much more restrictive? This seems highly unlikely, given: Public and private debt ratios, which are considerably higher than in 1981; The determination to avoid another recession after the COVID crisis, which was not clearly the case in 1981; The determination to avoid a fall in (financial and real estate) asset prices, given a much more powerful wealth effect today than in 1981.
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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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