Isn’t It Ironic? The Outlook for Federal Reserve Policy
Fed Chair Janet Yellen is widely viewed as a dovish central banker, but she is about to lead her institution into a prolonged campaign of raising the policy interest rate. Starting now is a tactical decision on Yellen’s part to achieve her longer-run strategic aim. Hiking the funds rate, even as economic growth disappoints and inflation remains subdued, buys Yellen the credibility with her colleagues and market participants to subsequently tighten slowly. Thus, US monetary policy will remain accommodative for a considerable period.