The Intelligence from The Economist Drop it when it’s hot: the Fed’s consequential hint
Jun 22, 2021
Alice Fullwood, Wall Street correspondent for The Economist, discusses the recent signals from the Federal Reserve that sent markets into chaos, exploring the broader impacts on global economies. Matt Steinglass, the Europe correspondent based in Amsterdam, highlights the rebound in drug use post-pandemic, focusing on the increased potency of drugs and the rise of organized crime. They also touch on the complexities of inflation strategies in business and the unexpected productivity dips from remote work amid more virtual meetings.
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Fed's Influence on Markets
- The Federal Reserve's policy stance significantly impacts share, commodity prices, and economic growth.
- Investors closely monitor the Fed's communications, as its policy decisions have global implications.
Fed's Signaling and Market Reaction
- The Fed's attempt to gently signal upcoming policy changes and adjust market expectations is reasonable, given recent inflation and growth.
- Their revised forecasts for inflation and interest rates caused market volatility.
Emerging Markets and Fed Policy
- The Fed's interest rate policy significantly influences emerging markets, especially their currencies.
- The 2013 "taper tantrum" exemplifies the volatility that can arise when the Fed tightens policy.