DRAFT: The Federal Reserve Deserves Respect!
An early draft of a column for Project Syndicate, triggered by reading Mohamed El-Erian’s worries that the markets will “bully” the Fed into cutting interest rates…
The very wise Mohamed El-Erian, writing in the Financial Times, says::
Mohamed El-Erian: The Fed should resist market bullying <https://www.ft.com/content/7d252519-b2be-4258-9b97-774e86584901>: ’The more the central bank gives in to investor expectations for sizeable and early rate cuts in 2024 the more markets will press for an even more dovish policy stance…. The risk is that the Fed, uncomfortable with the disconnection between its forward policy guidance and market pricing, is pressured into policy actions that please markets but prove inconsistent longer-term with the central bank’s mandate. That would not be new. It played out in January 2019 with a policy U-turn when Powell unveiled new language that opened up the possibility that the next move in rates would be down…
Apropos of this…