The writer, a founding partner of Independent Economics, was formerly head of economic forecasting at the OECDThere has been much comment on the current resilience of the US economy. Gross domestic product grew 2.9 per cent over the 12 months to Q3, while employment growth remains strong (non-farm payrolls up 150,000 in October) and unemployment low (3.9 per cent).

This resilience seems surprising given that it comes in the face of the largest cumulative increase in official interest rates in 40 years: the fed funds rate has been hiked by 525 basis points since March 2022 — 425 points in 2022 and 100 this year.

The quantitative effects of monetary policy — both in magnitude and timing — are notoriously uncertain. That said, a central rule of thumb is that each percentage point increase in official interest rates reduces aggregate demand by 1 percentage point, with the major effect coming in the following year. On that basis, the effects of the monetary tightening to date would reduce GDP by around 4 per cent this year, with a further 1 per cent or so in 2024, relative to what it would have been otherwise.