Box B: Not Your Father's Rate Cycle: US Economic Resilience Against Rate Hikes

Monica George Michail and Paul Mortimer-Lee

National Institute Global Economic Outlook, 2024, issue 16, 28-42

Abstract: In this box, we examine what explains the US economy's solidity despite sharply higher Federal Reserve (Fed) policy rates. We begin by showing that the starting point was drastically different from previous cycles, and so was policy. We conclude by arguing that the economy's reduced sensitivity to rate hikes will also reduce its response to rate cuts, necessitating deeper and faster cuts than otherwise.

Date: 2024
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