The End Of Summer Complacency Essay

1853 Words Sep 19th, 2016 8 Pages
The End of Summer Complacency
The end of summer has seemingly brought a fresh wave of sobriety to global financial markets. The catalyst was Fed Chair Yellen’s speech at the Federal Reserve Bank of Kansas City’s annual conference on monetary policy in Jackson Hole. She stated that the case for a higher federal funds rate had recently strengthened. This hot topic of conversation subsequently shifted to one of how many hikes are potentially likely in 2016, as well as their timing. Chair Yellen’s intention was to put into play the 20-21 September Federal Open Market Committee (FOMC) meeting as an opportunity to raise the federal funds target. Meanwhile, Fed Governor Lael Brainard, arguably the most dovish member of the Board of Governors, cautioned about the downside economic risks attached to prematurely normalising the policy rate. She clearly had the ear of Chair Yellen earlier this year, but it is unclear whether her views currently carry the same clout. Although Fed policy remains data dependent, any posturing has been dominated by the prevalence of asymmetric risks. Governor Brainard asserts that the costs of allowing the economy to overheat are lower than unnecessarily stifling economic growth via an unjustified higher federal funds target. This week’s FOMC meeting will give an indication as to whether asymmetric risks are still in vogue amongst its members. Another reason why markets have become jittery is the current state of the US Presidential Election campaign.…

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