Rate rises affect global markets—and may feed back to America

ON JUNE 13th the Federal Reserve raised its benchmark interest rate by a quarter of a percentage point, the seventh such increase since it began shouldering rates away from zero in December 2015. Markets shrugged—a rather different reaction from the one that followed a policy adjustment made five years ago this month. The chairman then, Ben Bernanke, dared advise investors that the Fed might soon start winding down its stimulative bond-purchases. Traders fell to their fainting couches, but not before pausing to sell. Yields on ten-year Treasury bonds leapt. Currencies around the world flopped. This “taper tantrum”, as it became known, raised concerns that Fed tightening might so perturb global markets that America itself could suffer. Having survived both tapering and rate increases, Fed officials now seem inclined to dismiss such worries. They should not. The danger of a nasty Fed feedback loop remains.

Wise central bankers are prepared for ill winds blowing from abroad. Thanks to...



via The Economist: Finance and economics Business Feeds

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