Insights - The monetary policy experiment

Updated: Mar 1

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In this insight, we will highlight how the Federal Reserve (Fed) changed its monetary policy during and after the Great Recession in 2008.

In our previous insight Understanding the next bear market we highlighted the risk of a major stock market decline and a potential subsequent recession between the years 2019 to 2021. Of course, none of us could have predicted that the world would suffer a pandemic like Covid-19, but we believe that this should be seen as the ignition when the spark was already created and showed itself clearly in September of the previous year.

This insight will kick off during the Great Recession in 2008 to explain more clearly what led to this spark and the monetary policy experiment the US central bank has embarked on. Since we believe that the market has missed important aspects regarding how the Fed, during and after the previous financial crisis, has changed how they conduct monetary policy, the purpose of this insight is to try to clarify this. The first part of the insight has been written with information and inspiration from the Fed and above all analyzes published by St. Louis Fed's analysts while the second part is written with information from more market-oriented sources.

This insight is publication two in a series of publications which will have a more fundamental angle in comparison with the previous insights more technical perspective.