There are difficult tasks, others very difficult, others impossible and a little higher up the impossible ones that almost everyone realizes this is so. However, the work of a central bank almost always falls within these gradations of tasks, due to the complexity of economies and the diverse and sometimes divergent impact that monetary policy measures have on different sectors of the economy. With the mix of the harmful effects resulting from the shock of the pandemic, which strongly conditioned economic activity, whether in the component of raw materials, by-products and human resources, combined with the disruption caused by the War in Ukraine, the FED was faced with an unprecedented situation.
This situation forces the largest central bank in the world to drastically reduce inflation, in the shortest possible time, knowing in advance that there are factors that it does not control, derived for example from the war in Ukraine, that is, the FED has to solve the problem on the one hand, when the cause lies at the other end. This means that demand must be reduced, since supply is outside the control of the central bank, which puts on the table such an impossible mission that everyone realizes that it is, namely it is not entirely plausible to think that demand can be controlled, through higher interest rates and the withdrawal of liquidity from the financial system, which affects the entire economy, without the business ecosystem going into protection mode, which invariably ends up in an economic contraction.
This is the result that is already starting to be verified in the data that are coming out on the largest economy in the world, which I remember has already registered two consecutive quarters of contraction, which is seen by some analysts as a recession. Apart from that, and specifically in the real estate segment, the impact of high-interest rates is devastating, pushing the sector to a level of activity that occurred in 2016. A reduction that should affect almost all sectors as the high-interest rates, the increase in the cost of living, and unemployment start to cause gaps in private consumption.
