Source: EconLog
by Scott Sumner
“The Fed would really like to avoid any further increase in interest rates. This psychological aversion to interest rate increases in not rational, and it actually makes it more likely that the Fed will find it necessary to raise interest rates even further. That’s because this sort of ‘reversal aversion’ is itself a form of forward guidance, which makes monetary policy more clumsy. It increases the risk that disinflation will reverse course, requiring further rate increases.” (04/15/24)
https://www.econlib.org/some-counterintuitive-thoughts-on-monetary-policy/