Et tu, Janet?
As panic gripped many of the world’s central banks in recent weeks, Janet Yellen’s Federal Reserve appeared to remain calm. With the United States economy powering ahead, the Fed signaled that it was edging away from its emergency interest-rate setting. That struck many as the right thing to do. The U.S. economy has averaged an annual rate of growth of about 3 per cent since the middle of last year and the unemployment rate was 5.7 per cent in January. A benchmark interest rate of zero is no longer required.
The Fed’s policy committee markedly upgraded its assessment of the economy at its last meeting at the end of January. That created the impression that the Fed was on track to raise interest rates by the middle of the year. It turns out that impression may be wrong. The Fed on Wednesday released the minutes of its January policy meeting. They reveal a hint of panic at the Fed, too. The data are positive, yet “many participants indicated that their assessment of the balance of risks associated with the timing of the beginning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time.”
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