Why the Fed Is Likely to Signal Greater Policy Flexibility
ByThe central bank must balance continuing to please markets and responding to domestic economic strength.
Spotlight on Jay Powell. Photographer: Win McNamee/Getty Images
One of the major questions facing the Federal Reserve when its policy-making committee meets this week is whether to counter the recent big change in the way markets characterize its policy mindset. In the last few weeks, markets have come to believe that the central bank led by Chair Jerome Powell is behaving, and will continue to behave, much more like its two predecessors: averse to bouts of financial volatility, and willing to use words and actions to both counter and minimize them. This is a notable change from the earlier view that this new Fed leadership is focused on normalizing monetary policy as a means of creating greater policy flexibility to deal with a future economic downturn, while also reducing the probability of severe financial instability down the road…
Why the Fed Is Likely to Signal Greater Policy Flexibility
