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A year ago, most analysts predicted that the U.S. economy would enter a recession in 2023 due to the Fed's monetary policy rate hikes aimed at dealing with the inflation surge that occurred at the end of the most critical phase of the pandemic.

Following the outbreak of the war in Ukraine, over the past year, the perception that an economic recession was inevitable in the short term has built up. However, the signs of a recession are now few and far between.

The crisis of 2022 has central banks striving to avoid the sins of the 1970s, fiscal policy resisting to avoid repeating the mistakes of 2009 and 2012, and the new international order trying to learn lessons from what happened 100 years ago.

Following a series of more aggressive 75 bp hikes at previous meetings, last week the ECB raised interest rates by just 50 bp, following in the footsteps the Federal Reserve and the Bank of England. In doing so, it is trying to strike the right balance, which is always difficult in times of stagflation as the current one.

Today, as recession looms and inflation rears its head, we are likely to see a return to a somewhat gloomy housing market, even if house prices do not actually fall. But how hard will the adjustment be this time around?

With inflation at multi-decade highs across many countries due to various factors (pressures generated by the post-COVID recovery in spending, fiscal stimulus measures, bottlenecks) and exacerbated by the war in Ukraine, central banks have shifted towards a tighter policy stance.

Thursday’s ECB meeting was presented a priori with two points of interest on the table, aside from the 75 basis point rate hike which had been widely anticipated by markets and analysts thanks to a fairly direct communication from the central bank itself.

At the meetings just held in Washington, the International Monetary Fund (IMF) has raised strong concerns over the rampant levels of inflation, the interest rate hikes that may be needed to keep it in check and the risk to the financial system, which has long been accustomed to low rates.