Quick Hit: Here's Why Rising Rates Have Yet to Cause a Recession

Does this mean rates need to rise even further?

Over the past several months, Jerome Powell has hiked policy rates at a record pace. Yet, inflation remains stubborn, employment strong and the economy resilient. Cracks are appearing, but the meltdown most expected has yet to materialize.

What gives?

Monetary policy feeds into the real economy via borrowing costs, such as mortgages.

While higher borrowing costs are affecting new home buyers, the much larger cohort of existing homeowners is sitting on dirt cheap mortgages locked in before rates started rising.

This is likely delaying the transmission of monetary policy to the real economy.