U.S. Monetary Policy: Slowly Moving Toward the Exit in an Interconnected Global Economy

We’ve had a vivid demonstration over the past six months of the effects of shifting expectations about U.S. monetary policy on global financial markets. To be sure, many other factors were also responsible for the gyrations in bond and equity prices and exchange rates over this time period—including importantly greater optimism about prospects in a number of advanced economies and increased concerns about the economic fundamentals of a number of emerging market economies. But the effects of Federal Reserve communication and action—or inaction—on market participants’ perceptions of how quickly the...