Fiscal dominance: The force that is undercutting the Fed’s inflation fight

Deficit and debt blowout are creating a stimulus that overwhelms the effects of monetary tightening to hold down inflation.

The US economy affects all others, given its size and the importance of its interest-rate regime. PHOTO: REUTERS
New: Gift this subscriber-only story to your friends and family

There are some mysteries related to the US economy, which affect all others, given its size and the importance of its interest rate regime.

For instance, why, after two years of the fastest interest rate hiking cycle in history, is the US economy nowhere near a recession, despite warning signs along the way, such as an inverted yield curve (a usually accurate predictor), lacklustre leading indicators and problems in the commercial real estate sector?

Already a subscriber? 

Read the full story and more at $9.90/month

Get exclusive reports and insights with more than 500 subscriber-only articles every month

Unlock these benefits

  • All subscriber-only content on ST app and straitstimes.com

  • Easy access any time via ST app on 1 mobile device

  • E-paper with 2-week archive so you won't miss out on content that matters to you

Join ST's Telegram channel and get the latest breaking news delivered to you.