St. Louis Fed, Report: Tightening Monetary Policy and Patterns of Consumption

“In conclusion, there is some evidence, although weak and not recent, that the real consumption cycle declines during episodes of monetary policy tightening. In 2022, consumption remained approximately 2% above trend. Additionally, financial conditions—shown by the financial conditions index—improved at the end of 2022 despite the Fed tightening monetary policy. Looking toward the future, it may be important to track the correlation of the financial conditions index and the effective monetary policy rate, which have recently diverged, to predict the behavior of consumption and inflation.”