Federal Reserve Bank Presidents are rushing to manage the market’s interest rate tightening expectations, after Bernanke’s surprise rise discount rate hike yesterday.
The punch bowl isn’t going anywhere, they implore. The fed funds rate shall stay low.
St. Louis Federal Reserve Bank President James Bullard said investors belief in high probability of a rise in the Fed’s benchmark rate this year was “overblown” and that the discount rate rise should not be seen as a policy signal.
“The discount rate move is part of a normalization process which is akin to our discontinuing many of our liquidity programs,” Bullard, who votes on the Fed’s interest rate-setting panel this year, told reporters in Memphis. “It does not indicate anything one way or the other about what we might eventually do with the federal funds rate,” he added.
“Monetary policy — as evidenced by the fed funds rate target — remains accommodative,” Dennis Lockhart, Atlanta Fed president, said in a speech. “This stance is necessary to support a recovery that is in an early stage and, in my view, still fragile.”
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