As late as December 2021, the Fed’s dot plot was predicting that the Fed might have to raise the Fed Funds rate by 25 basis points 3 times to a level of 0.75% in 2022. As the chart below shows, the Fed quickly revised this higher and conducted the most aggressive rate hike policy since the 1970’s (4.33%is a lot higher than 0.75%). The first chart above shows the rapid recent increases in the Fed Funds rate. Notice that these came after the original Powell pivot in 2019 and ZIRP throughout the COVID period.
The next chart shows the same Funds rate from 1971 to present. Note how high the rate had to go in the 1970’s to tame that inflationary episode. Also, take note of the period from 2009 to 2015 when the Fed irresponsibly pegged the Fed Funds rate at zero resulting in a massive misallocation of capital and the “Everything Bubble” which has now burst. Unlike the two earlier bubbles that the Fed played a role in creating (Dotcom in 2000, Housing in 2008), this bubble was at the Sovereign Currency/Debt level and the G-7 world has not experienced one of these since the early part of the 20th century. This is why this investing climate is going to surprise so many. Nobody alive has seen one of these things burst.