Commentary

The challenge of monetary tightening

The Fed’s latest interest rate hike is only one more step on the long and difficult road away from quantitative easing

Commitments from governments might come under pressure if inflation keeps heading upwards
Commitments from governments might come under pressure if inflation keeps heading upwards Photo: Getty Images

Takatoshi Ito is a former Japanese deputy vice-minister of finance

When it was announced on 13 September that the consumer price index in the US had increased more than expected in August, stock prices plunged and the dollar appreciated sharply. Markets knew that this would spur the Federal Reserve to announce another significant interest rate hike. And that is exactly what happened. But the pain of monetary tightening is just beginning. 

WSJ Logo