March 21, 2023
Keep Hiking After Something Breaks? The Fed Balances Financial Stability and Price Stability
Veteran Fedwatchers like to quip during tightening cycles that “the Fed will keep hiking until something breaks.” They are only half joking. The path of past tightening cycles is littered with the roadkill of market participants who got caught on the wrong side of a duration and/or convexity bet. Well now something has finally broken, and the FOMC has to…