Jerome Powell, chairman of the US Federal Reserve, testifies before the Select Subcommittee on the Coronavirus Crisis hearing in Washington, D.C., September 23, 2020.
Kevin Dietsch | Reuters
The Federal Reserve’s aggressive tone sent stocks down and bond yields higher, but for now the central bank has managed to move closer to tighter policies without causing massive market fears.
Still, concerns remain about whether inflation is truly volatile, and whether the central bank can continue smoothly on the path of its extraordinary policy.
The Fed surprised investors on Wednesday by including two rate hikes in its 2023 economic forecast, after not including one in its latest forecast in March. But it didn’t provide a timeline on how long it will be before it begins to cut its bond purchases.
“You have an oil tanker. You have to turn the wheel a long way, and then the ship starts to turn right down. That’s what we saw,” said Vincent Reinhart, chief economist at Mellon.