CHICAGO--(BUSINESS WIRE)--In the May issue of Themes on the Economy®, Mesirow Financial’s chief economist, Diane Swonk, lists the many policy choices at hand for the Federal Reserve during the next two years, pointing out that the Fed moved into uncharted territory after it “dropped the fed funds rates to effectively zero. With that action, the black-and-white world of raising and lowering short-term interest rates to apply brakes or stimulate economic activity was replaced by a somewhat surreal world of unconventional policy tools.” That characterization borrows from the “Wizard of Oz” movie, when Dorothy moves from a black-and-white Kansas into the Technicolor world of Oz.
Even though Fed officials speak more openly about policy than ever before, Swonk admits they can be hard for some to understand. To eliminate confusion, Swonk has this advice: “Financial market participants need to be particularly mindful… Speeches made by regional Fed Presidents who are not eligible to vote should be discounted relative to those who will be voting at upcoming meetings.”
Most usefully, Swonk lists the stages faced by the Federal Open Market Committee (FOMC) voting members during the next few years and cautions that, “Our biggest concern is the unintended consequences. A prolonged period of low interest rates has already juiced the junk bond market… (and) could be symptomatic of other, more systemic financial imbalances.” To learn more about where Federal Reserve policy is headed, read this month’s issue of Themes on the Economy®. Or watch a video. Archived issues can be found at mesirowfinancial.com.
Mesirow Financial is a diversified financial services firm headquartered in Chicago. Founded in 1937, it is an independent, employee-owned firm with approximately 1,200 employees globally. With expertise in Investment Management, Global Markets, Insurance Services and Consulting, Mesirow Financial strives to meet the financial needs of institutions, public sector entities, corporations and individuals. For more information about Mesirow Financial, visit its website at mesirowfinancial.com.
