Is the Fed boxing clever or scared to throw a punch?

In backing off from even a minuscule rate rise at its September meeting, the Federal Reserve is running the risk of appearing to be a follower rather than a leader.

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PA Europe

Janet Yellen’s predecessors as Fed chair Ben Bernanke and Alan Greenspan were often dubbed ‘the most powerful person in the world’, such was the strength of belief in the Fed’s tight grip on the world’s largest economy.

In theory Yellen should receive the same billing but does not, at least not to the same degree as her predecessors. This is arguably a symptom of a growing sense that the Federal Reserve is a follower rather than a leader.

It is markets that are all powerful it seems, with the FOMC scared to upset them by doing anything that is not already priced in.   

With the tail wagging the dog, can investors be confident the Fed still has a good grasp on the US economy?

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