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Mohamed A. El-Erian

The Fed Delivers a Hike and a Message

The Fed raised rates, as expected, and offered a reminder that it can't be the only game in town.
You can take that to the bank.

You can take that to the bank.

Photographer: Brooks Kraft

The Federal Reserve did more today than increase its benchmark interest rates by a quarter-point, only the third hike in more than 10 years -- it also took an important step forward in a gradual policy transition.

Hoping for what I have labeled earlier a “beautiful normalization” of rates, the central bank is moving beyond strict data-dependency and becoming more comfortable about leading markets rather than following them. In the process of becoming more strategic and less tactical, the Fed will, and should, shine more of the spotlight on others with responsibility for economic policy. This includes U.S. policy-making entities charged with fiscal, trade, labor market and regulatory issues, as well as other systemically important central banks, particularly the European Central Bank and the Bank of Japan.