What's "loco" is not the tightening now underway, but the super-lax monetary policy that preceded it for many years. The Fed kept short-term rates close to zer

What's "loco" is not the tightening now underway, but the super-lax monetary policy that preceded it for many years. The Fed kept short-term rates close to zero for nearly a decade. Longer terms rates were negative for many years. All of the world's central banks joined in the orgy of money creation. The Fed's balance sheet (assets bought by conjuring money) ballooned 4x in the same time: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... This Fed will now face unprecedented political pressure to reverse its course of monetary tightening and balance sheet unwinding. The President will almost certainly lose an election held during a recession. But reversing course is going to be very difficult, given the sharp and sustained rise in inflation over the last few years: https://stats.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical_us_table.htm https://stats.bls.gov/regions/mid-atlantic/data/consumerpric... Oddly enough, it looks like the President has the legal authority to fire the entire reserve board if he so chooses: Upon the expiration of the term of any appointive member of the Federal Reserve Board in office on the date of enactment of the Banking Act of 1935, the President shall fix the term of the successor to such member at not to exceed fourteen years, as designated by the President at the time of nomination, but in such manner as to provide for the expiration of the term of not more than one member in any two-year period, and thereafter each member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President. https://www.federalreserve.gov/aboutthefed/section10.htm https://www.federalreserve.gov/aboutthefed/section10.htm Never before in the modern history of US banking has there been a President with so much drive to kick convention to the curb, nor a Federal Reserve that has painted itself into such a small corner. If I were a gambler, though, I'd bet on the President. One way or another, the Fed will be forced to reverse its balance sheet unwinding and short term interest rate increase campaign.