US: the risks of a further interest rate shock

Jerome Powell hammered home a simple message yet again this week: persistent inflation rules out any cut to key interest rates. One might think that if monetary policy were maintained as it is, the effect on the economy would be almost neutral. In practice, the effect is restrictive. First, it prolongs the impact of past rate hikes. Second, it prompts a review of the outlook for future rates. A few months ago, long rates had fallen in anticipation of an earlier monetary pivot. N...