Walsh refuses to call the Fed “soldier: the market has already reacted

On 30 July, Federal Reserve Chairman Walsh stated that since the June meeting, the financial markets had completed most of the Fed's austerity policy, and he therefore did not agree to describe the current decision to maintain interest rates as a “suspension”. “I will not call today’s decision a ‘suspension’ in any sense. If it has to be labelled as “suspension”, then the performance of the financial markets is precisely the opposite.” Since the Federal Reserve ' s mid-June conference, the United States rate of return on 2 and 10-year sovereign debt has increased cumulatively by about 20 basis points. Walsh noted that during this period, the financial markets did not “suspension” the adjustment, but re-pricing on the basis of inflation data and performance of economic growth: On the one hand, inflation data have influenced market expectations; on the other hand, economic growth has remained strong, driving both nominal and real interest rates. He said: “It is true that today the Fed does not have a clear policy adjustment rate. But I think this is the beginning, not the end, of the whole policy story.”