No Rate Hike Volck-ano for Now

In its outlook this week, the OECD made distinctions between the current economic environment and the stagflation episodes of the 1970s. It pointed out that economies today are less energy intensive than they were 50 years ago. Central banks have also gained independence and built their credibility through decades of successful inflation targeting. As a result, longer-term inflation expectations haven’t strayed too much despite persistently high inflation of late. We think these distinctions matter. We also believe the government policy response to a recession would be entirely different today than it was back then.