Where does the Fed go from here?

摘要

Some are convinced the Federal Reserve is finished cutting interest rates and that its next move will be to raise them, but there is little certainty about either the timing or direction of monetary policy. The Fed's rate-setting Federal Open Market Committee (FOMC) culminated 325 basis points of easing at its April 30 meeting. And that's not all. It has launched three new emergency credit facilities to provide liquidity to what Dallas Federal Reserve Bank President Richard Fisher called the "clogged pipes" of the financial system. On March 16, a "day which will live in infamy" for Fed critics, the Fed not only financed JPMorgan Chase's takeover of Bear Stearns, it also began lending to other major investment banks for the first time since the Great Depression. It's up to historians to judge whether the Fed's nonstop and ongoing struggle to contain the subprime mortgage crisis will prove to be its "finest hour." Certainly, the Fed will have learned some lessons about the consequences of leaving rates too low for too long in the 2001 to 2004 period and about the need for better financial supervision. San Francisco Fed President Janet Yellen admits that, in the run-up to the subprime mortgage crisis the Fed and its fellow regulators were behind the curve. "We missed some of the risky developments that were unfolding," she says.