The Fed has, since spring 2022, raised the Federal Funds rate at an historically aggressive pace in order to curb inflation believed to be ignited by accommodative economic policy in response to the deleterious economic effects of the COVID-19 pandemic. Plainly, tightening monetary policy in an attempt to slow down an overheated economy by increasing interest rates. But did tighter monetary policy cool the economy?
The results are not clear as evidenced by the last three hotter-than-expected CPI reports and especially the most recent on April 10. More importantly, did raising the interest rate at which banks and other depository institutions lend money to each other really tighten financial conditions?
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