The US Federal Reserve has got serious on interest rates at last – thank goodness

The Fed is for real. That was the immediate verdict of the markets on Friday after the speech by Jay Powell, chair of the Federal Reserve, at the central bankers’ symposium in Jackson Hole, Wyoming.

The message was that the Fed would continue to raise interest rates and reverse quantitative easing – that ugly expression for central banks pumping money into the financial system – until inflation came back to 2 per cent. That was its “overarching focus right now,” he said, “and it would mean “maintaining a restrictive policy stance for some time”.

You might think that was anodyne stuff, but the markets had been hoping that there would be some signal that if the US economy tanked, the Fed would ease up. There wasn’t, and the S&P 500 index fell by 3 per cent. Now, with all markets, these short-term swings merely reflect how traders had positioned themselves. I think we should wait until after next weekend’s Labour Day holiday, to figure out what the Fed really means. Then we can make sensible guesses about what will happen through the autumn. Meanwhile, here are my half-down top takeaways.

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