Rate Hike Impact on Macroeconomy in Different Private Debt States

■ The recent rapid accumulation of private debt demands policy actions to reduce the probability of financial instability.■ Interest rate hikes are like a double-edged sword with possibilities of moderately easing some financial woes and hampering economic recovery. Accordingly, the timing and pace of the monetary normalization process need to take this into account.■ This study recommends a policy mix of monetary and macroprudential policies to strengthen financial stability