Wagging the Dog: Why the Fed Fears Wall Street
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The stock market has long been the mistress in the marriage between the Federal Reserve and the economy.
While central bank policy is supposed to be focused solely on maintaining full employment and price stability, boosting the equity market has been a furtive goal of monetary policy—generally not part of Open Market Committee discussions but never far from mind.
That surreptitious relationship came further into the open at the April 30-May 1 meeting, when Fed members discussed Wall Street expectations for the historically high level of central bank easing.
"A few members expressed concerns that investor expectations of the cumulative size of the asset purchase program appeared to have increased somewhat," the meeting minutes stated, noting further that those expectations have come even though the unemployment has dropped.
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