The Markets Don’t Believe the Fed

The Markets Don’t Believe the Fed

The Federal Reserve has a credibility problem. It wants markets to believe that it will keep raising rates, that they will peak above 5% and that it will then hold them there until at least the end of next year. But investors flatly refuse to accept the third.

Fed officials can argue that two out of three ain’t bad, as Meat Loaf sang. But the failure to convince Wall Street is undermining the Fed’s tight-money policy. The 30-year mortgage rate has pulled back from a peak above 7.1% to below 6.5% in less than two months, and financial conditions overall are as loose as they were at the start of June, according to a Chicago Fed measure.

#Markets #Dont #Fed

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