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The Fed Has Not Done a Good Job Guiding Rate Hike Expectations

The Fed Has Not Done a Good Job Guiding Rate Hike Expectations

5 Years ago | September 08, 2015 00:00:00

The main argument for the Fed holding pat this week seems to be that it has not signaled in advance that interest rates will be hiked at the September 17 meeting. The Fed generally likes to guide expectations to limit the reaction to a change in monetary policy by having a decision well discounted in advance so as not to spring a surprise. By making its decision data dependent, the Fed has not done a good job guiding expectations. In this regard, markets have pricing in a 30% risk of a rate hike although a jump in yields on Tuesday suggstes some may be hedging their bets. In any case, markets move when there is a surpr

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