March 25 (Reuters) – Now we know interest rates are rising
in the largest economy in the world: it isn’t a question of
whether, or even so much when, only how fast.
Janet Yellen, in her first Federal Open Market Committee
press conference since taking over as chair, surprised investors
last week by suggesting that rates can be expected to rise six
months after the taper is completed and QE is done. That puts
liftoff, all things being equal, at April of 2015, several
months sooner than markets previously were anticipating.
Subsequent comments from Fed officials have been more about
how best to characterize the perception created by Yellen,
rather than clarifying or correcting it.
St Louis Fed President James Bullard said that six months
wasn’t a change of policy, and was something the “private
sector” (which must somehow be distinct from financial markets)
was already anticipating. Narayana Kocherlakota, the president
of the Federal Reserve Bank of Minneapolis, denied the Fed was
being more hawkish while San Francisco Fed President John
Williams more or less said he’d not changed his view.
To be sure, the Fed will doubtless react to developments as
they occur on the ground, but it is hard to escape the
conclusion that, for one reason or another, it is now more
comfortable with the prospect of higher interest rates.