How there’s been a Greenspan-sized tightening to the economy even before the first Fed hike
Is the Federal Reserve loosening or tightening policy right now?
That seems like a silly question. Interest rates are still barely above zero, and this month, the Fed is still planning to buy $20 billion of Treasury securities and another $10 billion in mortgage-backed securities.
But that isn’t how markets are behaving. And economists at Deutsche Bank say there’s some validity to the idea that the Fed is actually tightening right now, before it makes its first interest-rate hike.
Their shadow rate — a model first introduced in…
