The written testimony accompanying Federal Reserve Chairman Jerome Powell’s visits to Capitol Hill last week left me with more questions than answers. It seems evident that central bankers expect they will need to boost their estimates of appropriate rate hikes either in March of June. It also appears that they would like to make this shift while remaining within the context of the existing policy language of gradualism.
That is a tricky needle to thread, and I understand the motivation. Policy makers simply do not want to spark a sell-off in Treasuries. But the past week has left me wondering if the Fed’s affection for gradualism has left us too complacent about the possibility of a rapid shift away from gradualism. I have lots of questions:
