The ‘New Normal’ in Monetary Policy is Anything But

by Andrew Osterland

A funny thing happened on the way to normal. The Federal Reserve Bank’s first interest-rate hike in almost 10 years was supposed to be a first step on the path toward a more “normal” monetary policy, a sign the economy no longer needed the life support of zero interest rates.

With financial markets now swinging wildly and other central banks experimenting with negative interest rates to jump-start morbid economies, the Fed’s first step toward normalcy may be its last for some time. Fed Chair Janet Yellen was cheered for her measured explanation of the December rate hike, but the market quickly soured on the idea of tighter monetary policy.

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