Central bank interest-rate hikes really started hitting home this week.
After a prolonged debate about why the most aggressive monetary tightening in decades had produced so little sign of financial strain, turmoil erupted. Treasuries volatility exploded to levels last seen when the collapse of Lehman Brothers set off a global credit crunch.
The demise of three regional U.S. banks and wobbles at global giant Credit Suisse Group — along with the ensuing upheaval in global capital markets — make the next moves by central bankers extraordinarily difficult. Inflation remains far above their targets, and some of the latest data have been going in the wrong direction. But credit growth is bound to be hammered by the disturbances of recent days, powerfully affecting the economic outlook.