Tim Duy: The Fed Has Enough Room to Combat the Next Crisis: "The Fed has more than enough room to replicate the responses to the 1987 stock market crash or the 1997 Asian financial crisis...
...They even met the challenge of the 2015 oil price crash simply by scaling back expected rate hikes in 2016. Given the expectation among market participants that the Fed will continue raising rates over the next year, just pausing on rate hikes would be a powerful stimulus. The likely willingness of central bankers to shift to a dovish stance may help account for the overall benign response on Wall Street so far to emerging threats from a more turbulent external environment. These include not only trade wars but also potential for financial crisis among emerging markets or the euro area. The risk these events pose for the overall economy would be bigger and more worrisome if the Fed felt its hands were tied such that they could not respond to a downturn. This is not the case. Market participants should know that the Fed is in a position to cushion the impact should these risks become a reality...
#shouldread