The year of the rate shock

ONcE MORE spfor the cheap seats at the back. That way the lesson may sink in. After a strong run from mid-October, stockmarkets have tumbled yet again. The & 500, an index of American shares, has shed 5% since December 14th, when the Federal Reserve increased interest rates by half a percentage point and Jerome Powell, its chairman, said that policymakers had no plans to start lowering rates until they were confident that inflation was moving down to 2%. “The historical record cautions strongly against prematurely loosening policy,” he declared.The end of cheap money caused drama in markets in 2022. Investors are hopeful that the chaos will soon be over and that a rate cut might come as soon as mid-2023. However, Mr Powell’s warning sounds like an effort to drive home the idea that the optimism is misplaced.