In recent weeks, the US Federal Reserve has adopted a more gradual approach to policy normalization, causing commodity and emerging markets to surge. While these developments may not make sense at first glance, there is a logical thread that explains them – and it centers on a potentially high-stakes gamble.
LONDON – In recent weeks, the US Federal Reserve has buoyed markets by adopting a more gradual approach to policy normalization. Fed Chair Janet Yellen’s most recent public remarks, in late March, were more dovish than anticipated. And, at its last meeting, the Fed suggested that it would pursue two, rather than four, quarter-point interest-rate hikes in 2016. In response, investors have sold the US dollar and bid up equity prices and US Treasuries, and commodities and emerging-market assets have surged.
LONDON – In recent weeks, the US Federal Reserve has buoyed markets by adopting a more gradual approach to policy normalization. Fed Chair Janet Yellen’s most recent public remarks, in late March, were more dovish than anticipated. And, at its last meeting, the Fed suggested that it would pursue two, rather than four, quarter-point interest-rate hikes in 2016. In response, investors have sold the US dollar and bid up equity prices and US Treasuries, and commodities and emerging-market assets have surged.