Well-documented policy lags suggest that central banks have done more than enough to reverse the inflationary impulse over the next 12 to 24 months. As the rate of inflation comes down, real interest rates (overnight rate less CPI) rise (better for savers but worse for borrowers) and crimp the economy even after central banks pause and then start cutting overnight rates. Today, real rates are 2.4% in America, the highest since the 2007-09 recession and 2.7x the long-term average since 1971 (chart below, courtesy of Bespoke). {cchart} Hoisington Management’s Q4 2023 letter explains real rate impacts this way: Due to a ... (full story)