> > But if you're right, why do you conclude that 5 interest rate hikes
>> had nothing to do with the decline in retail sales?
>>
>
>Because sales, consumer borrowing, inflows into stock funds, all continued
>to skyrocket on the face of the interest rates increases. The first signs of
>a slowdown didn't come until after the market unpleasantness. Of course,
>post hoc not necessarily ergo propter hoc and all that, but the evidence is
>pretty compelling.
But if the market reacted first to the interest rate hikes, and the real sector a bit later, then the interest rate hikes are the cause of both, and the only difference is in the timing.
Moves in interest rates have always taken time to affect the real economy; the Volcker tightening that started in 1979 drove the fed funds rate from around 10% to over 19% in July 1981 before the killer recession took hold.
Doug