What the Fed should do
We have a suggestion for the US Federal Reserve: come clean; and tell the market where you expect interest rates to be in two to three years’ time. Markets are being whipsawed by paranoia over when US rates will rise and by how much. Financial market commentary is sapping the real and household sectors’ confidence. So tell the market that cash rates will likely be at one per cent by mid- 2017; and when you announce that, put up rates by just ten basis points (0.1 per cent.) Get the markets refocussed on the longer-term or medium-term, and away from the short term. That clear signal would help calm markets and allow long-term investors and businesses to plan and invest. It would actually drive and sustain the US recovery. (VIEW LINK)
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