Just how much

There are some dual axis charts doing the rounds about just how far behind the curve the Fed might be, in terms of tightening.

Look at the below quote, and accompanying graph.

“It seems highly likely that at least the manufacturing part of the economy will slow markedly over the next 1 1/2 years, no? And that is with what the Fed has already done… 1/”

Now, my issue is that dual axis graphs can make for movements that are hard to put in context, no matter how compelling the posited relationship might appear.

Here’s where we are, in terms of the US financial conditions index. The move is almost unnoticeable.

Image

And you can get into a big conversation about levels, rates of change, and all that is good to have. But zooming out for context is often the best starting point.

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