Caroline Baum: The inherent asymmetry in the Fed’s monetary policy

Back in the old days, when the ratio of Federal Reserve talk to action was low, the central bank would adopt a “bias” in its policy directive, indicating the likely direction of the next move in interest rates. The Fed’s bias was said to be “symmetric,” an oxymoron, when the Fed was neutral about its next move, and “asymmetric” if it were leaning toward either tightening or easing.

The idea of a different kind of asymmetry in Fed policy has been gnawing at me for a long time, coming into clearer focus after the Fed slashed the funds rate to a range of 0% to 0.25% in December 2008 in response to the financial crisis.

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