- Stability of short term nominal interest rates is overrated. This hike can be easily reversed in future.
- This is a price Bernanke has paid for keeping Fed funds rate at near zero for an extended period.
- This is a price Bernanke has paid for not reversing QE.
- This is just a way to have a tiny symbolic tightening without restarting the interest rate cycle
More worryingly, this action again confirms that Fed believes that manipulation of short term risk free interest rates is all that we need to ensure economic recovery.