Global Slack, US Inflation and the Fed's Policy Error
policytensor.substack.com
After signaling four rate rises in 2016 this time last year, the Fed finally managed to deliver a quarter-point hike in a unanimous decision. It also signaled that it would raise rates thrice in 2017. Markets promptly responded by selling off bonds and EM assets, and strengthening the US dollar. Meanwhile, core inflation remains well below target. The Fed has, in effect, made clear that it regards the 2 percent inflation target as a ceiling; not a symmetric target.
Global Slack, US Inflation and the Fed's Policy Error
Global Slack, US Inflation and the Fed's…
Global Slack, US Inflation and the Fed's Policy Error
After signaling four rate rises in 2016 this time last year, the Fed finally managed to deliver a quarter-point hike in a unanimous decision. It also signaled that it would raise rates thrice in 2017. Markets promptly responded by selling off bonds and EM assets, and strengthening the US dollar. Meanwhile, core inflation remains well below target. The Fed has, in effect, made clear that it regards the 2 percent inflation target as a ceiling; not a symmetric target.