How will the central bank's policy shift slow inflation without a recession?

[David.S]

I’m trying to understand how the recent shift in central bank policy in my country is actually supposed to slow inflation without causing a severe recession. I keep reading about the transmission mechanism, but seeing my business loan rates jump while consumer spending in my town hasn’t really dropped yet just makes the whole process feel disconnected and hard to predict.

[GregoryZL]

Yeah I’m living this too. Our bank raised the business loan rate by a couple percentage points and we started watching every expense. Foot traffic hasn’t collapsed, but we’re selling mostly lower-margin items and delaying bigger capex. We paused that equipment upgrade last quarter and kept cash in the drawer, hoping the demand slow-down comes later rather than sooner.

[SamuelG]

In my case the policy shift showed up in tighter credit terms first. Loans got a bit harder to approve, and the underwriting got stricter even for customers with decent credit. We trimmed hiring plans and kept inventory lean. Revenue didn’t crater yet, but the upcoming months will tell if the demand curve bends or if we just wait for the lag to hit.

[Dennis56]

Do you think the real issue is not the policy itself but something else driving inflation?

[SamuelG]

I keep a little notebook on how prices drift here and there. Some days I drift into thinking about energy costs, then snap back to the tills. We cut marketing, renegotiated a lease, and tightened credit terms with suppliers, but sales still feel flat this week, so I’m not sure what to trust.