Known unknowns

13 December 2017 By Gina Chon Follow @GinaChon

With her fifth and final rate hike, the Fed boss has put monetary policy on a path to normalization without spooking markets or hurting growth. Her successor may not be so fortunate. As the central bank gauges potential tax cuts and trade wars, its moves become less predictable.

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The U.S. Federal Open Market Committee said on Dec. 13 it would raise its target range for the federal funds interest rate by a quarter point, to between 1.25 percent and 1.5 percent. It was the third such increase this year and the fifth since the Federal Reserve’s policy-making committee started tightening in December 2015.

In October, the Fed also started reducing its $4.5 trillion balance sheet. Prior to the 2008 financial crisis, the central bank’s balance sheet totaled less than $1 trillion. Some proceeds from repayments of Treasury bonds, mortgage-backed securities and other holdings are no longer being reinvested in more bonds.

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