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The Fed: Why the Fed should shrink its massive bond portfolio

When will the Federal Reserve raise interest rates next?

Minutes from its most recent meeting, held July 27 and released Wednesday, suggested officials are still focused on hiking rates this year. Investors believe there’s about a 41% chance that the next rate hike will come in December.

But the question about when the Fed will do the deed misses the point, according to two economists with practical experience working for the central bank.

In a world where too much money is sloshing around in pursuit of scant yield, the Fed’s traditional mechanism for raising interest rates, increasing the short-term federal funds rate, lures capital from across the globe.

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