DC hold’em

IF ANY other lift-off were so sluggish, you would not want to be aboard the rocket. In December the Federal Reserve raised interest rates from close to zero, where they had been since 2008, to between 0.25% and 0.5%. At the time members of its rate-setting committee said they expected four more increases in 2016.

Not any more. Shortly after lift-off, stockmarkets, which always doubted the Fed’s plans, tumbled on fears that disappointing growth in China would drag down the world economy. The S&P 500 lost 11% between the start of the year and its trough in mid-February. Surging spreads (the excess interest over government borrowing) on corporate bonds, often a sign of imminent economic woe, caused some pundits to predict a recession. And market-based measures of inflation expectations slumped. At one point in February, the gap between yields on inflation-protected bonds and the regular kind implied that inflation would average just 0.9% over five years—the lowest projection since 2009.

Unsurprisingly, the Fed held fire in January and March. Janet Yellen, the Fed’s chairman, made it clear that global turbulence had...

via The Economist: Finance and economics Business Feeds

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