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EconomyAnalysisPast Article

A Rate Cycle Is Not a Personality

Hiking and cutting are sequences of decisions. They are not moods, and they do not rhyme on command.

By Arthur Lin, Economics Columnist

New York1 min read

a large building with columns and a flag on the corner
a large building with columns and a flag on the cornerPhoto by Joshua Woroniecki on Unsplash

Readers like a cycle because it promises a shape. Rates go up, something breaks, rates come down. The last forty years contain versions of that shape and versions that refuse it. The early-1980s funds rate was in double digits. December 2008 brought a target range of 0 to 0.25 percent. The 2022 hiking cycle started from near zero. Those are published regimes, not a template.

A committee decision is a document with a date and a vote. The next document is not implied by the last one. People who say the cycle 'has to' finish in a certain way are selling the shape. The shape is a summary of the past. It is not an instruction.

The useful habit is narrower. Know which range is in force today, because the statement says so. Know which older range you are comparing it with, and the year of that comparison. Leave the personality of the cycle out of the lede.

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