The Profit and Pain of Stimulus

At a late January meeting, Federal Reserve officials signal to the market that interest rates are due to rise soon. The move catches investors off guard. Stock and bond prices plunge, while the U.S. dollar surges. That isn’t a forecast for this week’s meeting of the policy-setting Federal Open Market Committee; it is the scenario that played out six years ago this month. Today, no one expects the Fed to veer from its commitment to keep rates low for an “an extended period.”