Milton Friedman, the Nobel laureate in economics, has a famous saying: "the impact of monetary policy on the economy is long-term and with uncertain time delays." Since it takes time for the full effect of austerity to emerge, the Fed tends to take gradual action to adjust policy step by step, while scrutinizing economic data for its impact.

But now the Fed has changed the rules of the game. With inflation rising rapidly to levels not seen in decades, the central bank has had to slam on the brakes.This increases the risk that the Fed may raise interest rates too much and could plunge the economy into a deeper recession than is needed to curb inflation.

• Stock market:Capital markets are very sensitive to interest rate hikes. The S & P 500 peaked in January, two months before the Fed raised interest rates in March.

• Real estate:For the housing market, tightening began when mortgage rates began to rise in January 2021. It has now exceeded any cycle since 1981. Historically, housing starts have fallen in the two years after the Fed raised interest rates. New home construction fell 24% in the fed's rate hike from march to July, and the decline is likely to last for years.

• Labor market:Historically, the rise in unemployment has generally occurred two years after the first rate hike. But this time it may be different because the Fed raised interest rates too late and too fast. When the inflation rate is too high, the unemployment rate usually rises significantly and a recession occurs.
  

• Inflation and recession:Historically, inflation did not fall until unemployment rose, and the exact intervals varied a few years after the first rate hike. If the current cycle turns out to be a peak in September, the gap between the Fed's first rate hike and the peak of inflation will be the shortest in history. And usually the inflation shift is accompanied by a recession. But recent economic data have remained strong, and getting out of recession depends on whether inflation will fall quickly.