The Fed and Interest Rates: Lessons from Oz

In my last post on equity risk premiums and the market, I argued that the equity markets have been priced on the presumption that the Fed has the power to control where interest rates will go in the next few years. Wednesday’s press conference by Ben Bernanke was a perfect example of how the Fed has become the center of the equity market universe and how every signal (intentional, implied or imagined) of what the Fed plans to do in the future causes large market gyrations.The Fed speaks and markets reactBen Bernanke’s press conference was at the end of the meetings of the Federal Open Markets...

Read more »