Understanding the Fed’s Dovish Turn
— March 18, 2019
By Nouriel Roubini
But just six weeks later, at the FOMC meeting in late January, the Fed indicated that it would pause its rate hikes for the foreseeable future and suspend its balance-sheet unwinding sometime this year.
Several factors drove the Fed’s volte-face. First and foremost, policymakers were rattled by the sharp tightening in financial conditions after the FOMC’s December meeting, which hastened a rout in global equity markets that had begun in October 2018. And these fears were exacerbated by an appreciating US dollar and the possibility of an effective shutdown of certain credit markets, particularly those for high-yield and leveraged loans.
Read the full Project Syndicate article.
Nouriel Roubini is a Professor of Economics and International Business and the Robert Stansky Research Faculty Fellow.