The Great Debate UK
from The Great Debate:
The Federal Reserve is putting on a brave face about the rise in Treasury yields.
At the moment, the Fed can afford to put off bringing out the big cannons for a little while. If market optimism is overdone, a few weak economic releases would soon send interest rates plunging again. If the market is right, then higher rates are justified and the economy will cope.
But Fed policymakers, who next meet in two weeks, should be getting the artillery ready. They have already promised to buy as much as $300 billion of Treasuries before September.
Unless rates come down swiftly, this limit should be increased substantially.
So far, the Fed has managed to confound the skeptics of their unconventional monetary policy.