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Chart of the month: Federal Reserve interest rates and financial market crises
When interest rates go up, shallow cracks can often open up into gaping holes...
Central banks are determined to get inflation under control. But as the chart shows, when interest rates go up, shallow cracks can often open up into gaping holes.
Eventually, tighter monetary policy will get into these cracks, and with a lag there are often crises, recessions or both, eventually forcing central banks to cut rates again.
We’ve already had one such crack exposed, which toppled SVB in the US and Credit Suisse in Europe. But with inflation proving sticky, central banks are unwilling to relieve the pressure
The worst may still be to come.
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