The Fed: One chart shows how much the Fed tightened financial conditions — and how far it still could go

Financial market conditions were becoming less accommodative last year, but the trend reversed course this year, according to a chart published by the International Monetary Fund in conjunction with its spring meeting.

The chart shows movements in a financial conditions index for the U.S., including interest rates, house prices and corporate valuations.

The chart shows that the steady and slow rise in U.S. central bank interest rate hikes began to bite in 2018 and financial market conditions became less stretched. Then, in the fourth quarter, the market selloff left financial market conditions as close to restrictive as they’d been for three years.

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