At the same time, a smaller-than-normal increase would test the waters of the market without unduly roiling them and underscore the Fed’s other vow that it will raise rates cautiously. Officials would also have less to cut if the economy did suddenly swoon and always have room to speed up increases later if it accelerated.
Ultimately, the Fed was unorthodox in easing monetary policy so also may be in tightening it.
“The interest-rate environment since 2007 has been very different,” MacKinnon, global macro strategist at VTB in London, told clients in a report on Monday.