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Stick or twist: the Fed decides. From The Economist Espresso. 09/17/2015



Place your bets. Today the Federal Reserve decides whether to raise interest rates from a record low of 0-0.25%, their level since 2008. Markets put the chance of action at roughly one in three; analysts are split about evenly. The Fed’s rate-setters will be weighing up developments since their last meeting, including gyrations in financial markets and a possible slowdown in the world economy. Markets will throw a tantrum if the Fed pulls the lever. But caution should win the day. One reason is that premature take-off can cause a crash. In 2011 the European Central Bank raised rates twice only to be forced into cutting again; Sweden made a similar mistake, starting to tighten in 2010 but reducing rates the next year. Both economies ended up needing extraordinary monetary stimulus: this year the ECB began quantitative easing; Swedish interest rates are negative. It sometimes pays to be patiente.




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