After the Fed

The Federal Reserve today delivered exactly what was expected: a liftoff in interest rates from the zero lower bound, coupled with strong assurances that the future rise in interest rates will be moderate. Markets reacted hardly at all to the statement and Janet Yellen’s press conference, beyond a bit of short covering, by and large seeing the decision as a comforting first step towards normalization at a time of significant global tensions. In sum:

The overall message was that monetary policy will remain extremely accommodative and supportive of a continued economic expansion in the United States. Four broad challenges await though if the Fed is to sustain this optimism.