For Federal Reserve policy officials gathering for the first time since their epoch-ending decision to raise interest rates in December, the backdrop this time could not be more different.
The long-awaited rate increase went smoothly, but simmering concerns over China, the global economy , commodities and financial market valuations have risen to the fore. Fund managers who were relaxed about slightly tighter monetary policy last month are wondering whether that was complacent.
“It is reasonable for investors to wonder whether Fed’s December rate hike was a policy error,” says Bob Michele, chief investment officer of JPMorgan Asset Management. “Historically the Fed has raised rates because either growth or inflation was uncomfortably high. This time is different: growth is slow; wage growth is limited; deflation is being imported.”