Interest Rates May Have Peaked

Is U.S. monetary policy still accommodative? It is something that we've probably been taking for granted for several years now. Sure, we often debated whether the Fed was too loose or not loose enough, but we knew the Fed was indeed providing some degree of monetary stimulus with its combination of huge balance sheet and extremely low rates. Now it isn't so obvious.

As I wrote immediately after the Fed meeting last week, the flattening yield curve seems to be saying rates are nearing a peak. In the real economy, the decelerating inflation rate as well as the middling pace of job gains are signs that perhaps policy is a bit tight. The Fed seems hell-bent on hiking rates at least one more time in 2017, as well as starting to reduce the size of its balance sheet. If policy is already too tight, this is a mistake with potentially disastrous consequences. Today we'll walk through the classic signs that monetary policy is tight or loose, and see what that tells us....1107 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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