The Fed also finds itself operating in a fluid and unusual global environment, characterized by multi-speed growth and unusual political uncertainty, and now subject to greater divergence of monetary policy among the most influential central banks. With political divisions preventing other types of policy adjustments from reconciling this divergence in a smooth fashion, the role falls primarily to financial markets that have a lot less inherent liquidity these days.
The rate decision constitutes an important further step in normalizing monetary policy after the trauma of the global financial crisis. But it is not an occasion for the Fed, or anyone else, to proclaim “mission accomplished.” The path ahead remains tricky for the global economy.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.