The Federal Reserve’s New Course Is Good. For Now
Fed Chair Jerome Powell said the right things about the outlook. That doesn’t make his job any easier.
Tightrope walker.
Photographer: Brendan Smialowski/Pool/Getty Images
At the conclusion of this month’s meeting of Federal Reserve policy makers, the central bank announced that it will “soon be appropriate” to start raising interest rates. This affirmed investors’ expectations of a first quarter-point increase in March followed by two or three more before the end of the year. In addition, the Fed says it will end its net asset purchases — so-called quantitative easing — in about a month and is considering how quickly after that to reverse the process and run its balance sheet down.
None of this was surprising. The Fed has been foreshadowing it for weeks. Yet financial markets greeted the announcement nervously. How come?