Treasury yields are not tracking close to inflation the way they did in the 1980s.
Why that is happening is a damn good question, but the reality of the data is that Powell's rate hikes are not behaving the same way Volcker's did. Failing to acknowledge that and adjusting the strategy accordingly is simply irrational.
If yields don't cooperate the Volcker playbook is effectively mooted.
I also remember Volcker saying that interest rates alone were not enough.
I also remember Volcker raising rates AFTER peak inflation had passed.
https://fred.stlouisfed.org/graph/?g=UO52
Inflation was already in retreat when Volcker pushed rates to near 14%. Arguably there was never a need for the last 100bps of rate hikes.
But most critically, Treasury yields are not cooperating with the Volcker script this time around.
https://fred.stlouisfed.org/graph/?g=UMMz
Treasury yields are not tracking close to inflation the way they did in the 1980s.
Why that is happening is a damn good question, but the reality of the data is that Powell's rate hikes are not behaving the same way Volcker's did. Failing to acknowledge that and adjusting the strategy accordingly is simply irrational.
If yields don't cooperate the Volcker playbook is effectively mooted.