Accordingly, a significant component of the rate tightening so far is essentially permanent in nature. While the associated reanchoring of inflation expectations means that the rise in real rates is less than the rise in nominal rates, the permanent nature of this component of the rate tightening amplifies its impact compared to a purely temporary increase in rates.
Second, there is an adjustment component that reflects our monetary policy response to the current high inflation. It is fully priced (in line with our expressed policy intentions) that the main policy rate (the DFR) will reach 300 basis points in March, and it is priced to rise even higher subsequently.