Recently, I wrote a series of posts predicting that the Fed would give up on QE and move toward forward guidance in order to be able to normalize policy. Nevertheless, I have also been saying for quite some time I believe the US zero rate policy is ‘permanent’. There are big implications from this for markets, risk, asset allocation and banks. Yesterday, we finally got an extraordinary confirmation from two Fed papers that the Fed is indeed going for forward guidance. But the papers also indicated the Fed has moved toward a near-permanent zero rate policy due to the economic situation in the United States.
First, let’s review the move from QE to forward guidance. In September I wrote about tapering and the shift from QE toward forward guidance. My ...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.