Tough Tightening

With another 75bp hike this month, a 50bp hike in September and November, plus the continuing effects of QT, and the Fed will have tightened monetary policy by a staggering 350bps in CY2022. Add deeply contractionary fiscal policy, an inverted yield curve, a steady decline in the monetary base – the only money banks can lend out – and a return to pre-covid growth in M1 and M2, makes me nervous.