PGIM Fixed Income -Thu, 12/07/2023 - 16:36

Assessing the U.S. Economy's Evolving Sensitivity to Interest Rates

Historical relationships suggest that the Fed’s tightening campaign should have already pushed the U.S. economy into recession. Yet, the U.S. economy’s remarkable resilience over the past 18 months raises the core question of whether the U.S. economy’s sensitivity to interest rates has changed and, if so, to what extent.

As the center of our research package on the topic, this paper reveals that a varied adjustment process across certain sectors lowered the broader economy’s sensitivity to interest rates. Rather than a recession, our findings provide additional contours to our modal economic scenario.


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