How will the Fed raise rates once it starts? Gradually, in small steps? Faster, with larger steps?
In 2012, before becoming Fed chair, Janet Yellen argued for a later first rate-hike than would be suggested by a traditional “Taylor Rule” approach, followed by more aggressive catch-up rate hikes. Now, however, she is suggesting that those rate hikes will be gradual and measured after all. Almost certainly she is wary of a repeat of 1994, when the Fed began raising rates and bond markets took a pounding. Read more »