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Supersized Monetary Policy Was Needed

Since inflation was supersized by COVID-19 as was the response to the pandemic, monetary tightening had to be supersized as well, says Kristina Hooper, Invesco chief global market strategist. She says, “thanks in large part to fast-food restaurants, many consumers grew up with the term ‘supersize’ – associated with bigger portions and abundance.” However, some central banks that had been supersizing rate hikes are now preparing to reduce the size of their rate hikes going forward. The Bank of Canada started downsizing rate hikes with a 50 basis point lift in late October following hikes of 100 and 75 basis points previously. And now the U.S. Federal Reserve (Fed) appears poised to do the same. She says a “substantial majority” of the Federal Open Market Committee (FOMC) members believe that it would “likely soon be appropriate” to slow the pace of interest rate hikes as a slower pace would better allow the FOMC to assess progress toward its goals of maximum employment and price stability.

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