When the Fed assumes to deflate Wall Street


The central bank of the United States has set itself the overriding objective of restoring price stability. Syuji Honda/blvdone - stock.adobe.com

For the first time since the 1980s, the US central bank has dared to raise its key rate sharply without being alarmed by the fall in stocks and bonds.

Since the end of August, the Federal Reserve is no longer afraid to scare the markets. This turning point in economic history has not finished doing damage. The central bank of the United States, belatedly but not without reason, has set itself the overriding objective of restoring price stability. Flying to the rescue of the markets is no longer his concern. Unless, of course, a general collapse calls into question the soundness of the banking system.

For the first time since the 1980s, Wall Street has to live with a Fed that dares to raise its key rate sharply without being alarmed by the fall in stocks and bonds. The “tapertantrum”, this nervous breakdown of the bond markets so dreaded in 2013, when the Fed of Ben Bernanke dared to consider the end of its purchases of public debt, is relegated to oblivion. The “Greenspan put” is dead. This is what was called, in the event of a plunge in prices, the de facto guarantee of an accommodating monetary policy under Alan Greenspan...

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