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Fed Chair Kevin Warsh has signaled he intends to give market signals more weight in monetary policy decisions.
Strategists at Morgan Stanley have responded with a pointed warning: markets may regret being handed that kind of influence over the institution that sets the price of money.
The Feedback Loop Morgan Stanley Is Flagging When a central bank publicly commits to following market signals, market participants stop being passive transmitters of information and start being active senders.
Those who are long risk assets have every incentive to push prices in directions that invite easier policy. Those on the other side have the opposite incentive.
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