How do you know when you’ve gone far enough? That must be the question starting to dawn on the minds of central bankers in their current rate hike cycle. But having drifted so far from the normal rules based policy of monetary loosening during the pandemic, their responses seem to also be deviating from rules based policy during the tightening. Otherwise, interest rates would already be several percentage points higher, given the effective levels of inflation.

In the absence of a rules based system, one has to rely on feeling and intuition, the subconscious rather than the conscious. And so, the impact of rate hikes that were deliberately implemented to counteract the impacts of the previous policy of rate reductions and money printing, should be being noted by policy makers.

Three banks in the US failed recently, Silvergate, Signature and Silicon Valley Bank. Other than all having names starting with ‘S’ these banks have something else in common, they’re all relatively new, and all relatively fringe. Signature and Silvergate both leaned heavily into the Cryptocurrency markets and Silicon Valley Bank has always been focussed on startups and tech companies.