The Fed Is Watching Wall Street
ByWilliam Dudley, president of the Federal Reserve Bank of New York, has long believed that Fed policymakers should pay more attention to stock market swings. Now, with the Fed lifting rates for the first time in almost 10 years, Dudley, who also serves as vice chairman of the Fed’s Open Market Committee, has a chance to put his ideas into practice.
The Fed has a dual mission: to keep unemployment low and prices stable, which it tries to accomplish mainly by making changes in a key lending rate, the federal funds rate. To assess the economy, it examines data such as monthly reports on the job market and consumer spending. It doesn’t put a lot of weight on stock prices, which can be volatile, plunging and soaring from day to day, sometimes for no apparent reason…
