Economics
Fed Eyes Rates as Asset-Price Tool in Break With Hands-Off Past
- Yellen says easy money policy can cause financial stability
- Strategy echoes approach backed by Fed chair contender Warsh
Oanda's Halley Sees U.S. Dollar Strengthening Into 4Q
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Federal Reserve policy makers are embarking on a subtle shift in strategy with potentially big implications for investors: using interest rates as a tool to contain the knock-on effects of lofty stock and asset prices on financial stability and the economy.
The sharpened focus on asset values evident in Fed officials’ public and private remarks suggests the central bank will be more inclined to raise interest rates than otherwise, even if inflation is low. It also means that financial markets can no longer expect -- in the words of Allianz SE chief economic adviser Mohamed El-Erian -- the Fed to be their BFF, or best friend forever, providing them with unstinting support.