Edward Luce of the Financial Times wrote: “Shakespeare foretold the tale of America’s latest debt-ceiling crisis – full of sound and fury, signifying nothing.” Now that Congress has passed a debt deal that doesn’t increase taxes, with marginal restraint on government spending growth, which Joe Biden and Kevin McCarthy hammered out, markets will likely focus on monetary policy over the next 10 days. What should be an appropriate monetary stance is easy to determine until a decision has to be made on when enough is enough. Have we reached that point in the cycle? According to Raghuram Rajan, professor of Finance at the University of Chicago, the Fed is damned if it raises rates and damned if it doesn’t. This confusion arises because opinions are as divisive as politics itself.
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By Hubert Marleau