The Effectiveness of the Fed’s Monetary Policy in Targeting Inflation in the Years 2022-2024

This article analyzes the inflationary dynamics in the United States and Europe, the factors that drive them, and the recessionary risks obscured by understated official statistics. The study emphasizes the global significance of monetary policies implemented by the Federal Reserve (Fed) and the European Central Bank (ECB) under inflation targeting. The objective is to assess the effectiveness of these policies in the face of divergent regulatory measures. Using systems theory, financial and statistical analysis, and liquidity cycle modeling, the research identifies the key drivers of inflation in 2022-2024, evaluates the Fed’s policy of interest rate hikes and balance sheet reduction, and examines their impact on inflation and recession dynamics. The findings show that measures intended to curb inflation have instead increased Treasury yields, worsened debt refinancing, and pushed the financial system towards a liquidity crisis by early 2025. The study highlights persistent imbalances, including oil market cycles, low strategic reserves, unrealized bond losses, central bank deficits, and rising sovereign debt costs, which hinder the stabilization of inflation. It concludes that monetary tightening has had counterproductive effects, making interest rate reductions unlikely before 2026. These results valuable provide insights for policymakers and other stakeholders in developing effective monetary strategies.

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