Global risks weigh on the Fed - FT.com
"The problem the Fed has is its mandate is to worry about the US alone, but there is increasing sense that the US is shifting from being a large, closed economy to smaller, open economy — relative to the rest of the world — that is more buffeted by events elsewhere,” [Stephen King] said."
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"One lesson from the violent market movements of early 2016 that followed the Fed’s December rate increase was that it is difficult for the central bank to signal a policy tightening without driving up the dollar and provoking a market ruckus that reverberates back and hits the US.
“Their actions are having global consequences with spillovers that are very meaningful,” said Mr Duy. “That basically caused the Fed to say we need to evaluate this exit strategy, and we will have to have a more gradual pace of exit than we envisioned three or four months ago.”
The close interconnectedness of Fed policy and global markets has been a theme pushed by Lael Brainard, one of the Fed governors, who appeared reluctant even to go along with the initial increase in Fed rates in December. She argues the combination of the highly global role of the dollar and US financial markets, as well as the low level of official rates, may be heightening spillovers from foreign financial conditions.
Domestically focused US analysts were wrong footed on Wednesday in part because by a myriad of measures America’s domestic economy is at least as strong now as was predicted at the end of 2015, when the Fed pushed through its landmark quarter-point rate increase."
The only surprise out of this article is that Lael Brainard, a Fed governor, actually understands basic economics, and financial markets. Woo hoo, we're up to one!
Janet is a naif in over her head, pulling the Keynesian levers, having fun, but understanding nothing. Frankly, after the decades of whacky easy money policy, and the last seven years of infinite quantitive easing, interest rates are a fiction. Likewise, what ever Janet does is fiction, however, if we are ever to find our way out of the Keynesian house of mirrors, we need to stop what the Fed is doing, and reinstitute rational economic practices. Continuing with the wild lever throwing, will not do that.
When did the entire world become a Dali painting?