Despite yesterday’s market sell-off, the Fed is still on track to raise interest rates in June.
Wednesday’s action is no more than a speed bump for the Fed. It will not stop the Fed from moving forward with another 0.25% rate increase.
The Fed is embarking on a new path, a path that started several years with QE (quantitative easing).
QE is the name for the method the Fed uses to ease monetary conditions when interest rates are already zero. Conventional monetary policy calls for interest rate cuts to stimulate growth and inflate asset prices when the economy is in a recession.
What does a central bank do when interest rates are already at zero and you can’t cut them anymore?
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