monetary policy

President Barack Obama’s nominee for Federal Reserve chair appeared before the Senate banking committee on Thursday. She mounted a vigorous defence of the Federal Reserve’s quantitative easing policy as she faced lawmakers in her first big test of political and communications skills.

Gina Chon and Shannon Bond reported from New York with James Politi in Washington.

 

When we look back on the FOMC meeting on June 19 2013, it will probably be seen as the moment when the Fed signalled that it was beginning the long and gradual exit from its programme of unconventional monetary easing. The reason for this was clear in the committee’s statement, which said that the downside risks to economic activity had diminished since last autumn, presumably because the US economy had navigated the fiscal tightening better than expected and the risks surrounding the euro had abated.

This was the smoking gun in the statement. With downside risks declining, the need for an emergency programme of monetary easing was no longer so compelling. The Fed has been the unequivocal friend of the markets for much of the time since 2009, and certainly ever since last September. That comfortable assumption no longer applies.

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