Faced with a debt crisis and an economic crisis, central banks will back down from tough talk and not raise rates further.

Horizon: end of 2023, the year the forecast was made for. Roubini predicts that major central banks, chiefly the US Federal Reserve and also the ECB and Bank of England, will back down from their tough talk when faced with debt or economic stress, and stop raising rates while inflation is still clearly above target. True: during 2023 the Fed and most other major central banks stopped or reversed hikes sooner than they had signalled, in visible response to financial, debt or economic stress (for example a banking crisis or a debt-market crisis), with inflation still well above 2%, and official statements or minutes cite that stress as the reason. Mostly true: the Fed or most majors paused or reversed earlier than signalled because of such stress, but one major bank kept tightening or the pause came with a minor qualification. Mixed: some major central banks backed off because of stress while others kept hiking to their signalled peaks. Mostly false: hikes paused only after the banks had reached roughly the peak rates they had signalled, and they framed the pause as policy working rather than a response to crisis, or they backed off only briefly before hiking again. False: the major central banks kept raising rates through stress episodes in 2023 (for example hiking during or right after a banking-stress event) and held a restrictive stance without cutting while inflation stayed above target.

Set before the research began.

1. E1 Federal Reserve issues FOMC statement Federal Reserve Board · 26 July 2023

   “In support of these goals, the Committee decided to raise the target range for the federal funds rate to 5-1/4 to 5-1/2 percent.”

2. E2 Transcript of Chair Powell's Press Conference -- June 14, 2023 Federal Reserve Board · 14 June 2023

   “In light of how far we’ve come in tightening policy, the uncertain lags with which monetary policy affects the economy, and potential headwinds from credit tightening, today we decided to leave our policy interest rate unchanged”

3. E3 Annual Report 2023 European Central Bank · 18 April 2024

   “Ultimately the Governing Council decided at its October and December meetings to keep the key ECB interest rates unchanged.”

4. E4 Meeting of 26-27 July 2023 European Central Bank · 31 August 2023

   “members agreed that tightening the monetary policy stance by further increasing interest rates was warranted.”

In June 2023 the Fed held rates and cited "potential headwinds from credit tightening" among its reasons (E2). It then raised the federal funds target range to 5-1/4 to 5-1/2 percent in July (E1), so it backed off only briefly before hiking again. The ECB agreed to raise rates further in July 2023 (E4) and held them unchanged only at its October and December meetings (E3), after continuing to tighten. Under the criteria, a brief pause followed by more hikes counts as mostly false, not a clear retreat from tough talk in response to stress.