Over the past four decades, there have been six cycles of rate hikes, including the famous Volcker fight against inflation in the 1980s.
There are various types of these interest rate hike cycles, including high inflation caused by supply-side pressure, bubble pressure caused by real estate and stocks, and normalization process after the implementation of unconventional policies.
1. 1983.3-1984.9: Oil supply shock combined with vague policy objectives, the United States entered a vicious circle of stagflation.
As Fed chairman, Volcker made controlling inflation a central goal and pushed through a tough tightening policy. He clamped down on growth in the early 1980s and then shifted to raising interest rates.
2. 1987.1 — 1989.7: Inflation control gradually became the policy target of the Federal Reserve. Taylor Rule was gradually introduced, which clarified the positive relationship between high inflation and interest rate increase.
During this period, inflation rose and the Fed responded by raising interest rates.
3. 1994.2-1995.2: The economy and stock market showed signs of overheating after a rapid rebound from the recession.
Subsequently, the pace of Federal Reserve rate increase exceeded market expectations, the bond market turbulence.
During this period, the Fed began to increase the guidance of inflation expectations.
4. 1999.6-2000.5: Under the impact of the Asian financial crisis, the Federal Reserve cut interest rates in response.
In June 1999, the Federal Reserve decided to withdraw its accommodative policy and start raising interest rates, which was followed by the bursting of the Kornet bubble.
5. June 2006-June 2006: In 2001, the Federal Reserve slashed interest rates as a stock market rout triggered a recession.
Since then, the economic recovery and rising house prices have sparked fears of an asset bubble, and the Fed has started raising rates again.
6. 2015.12-2018.12: After a long period of zero-sum QE policy, the Federal Reserve began the process of monetary policy normalization.
The pace of early interest rate increase is cautious, and the later period is significantly accelerated or even aggressive.
The hawkish degree greatly exceeds market expectations.