The Fed is laying the groundwork for reversing its super-accommodative monetary policy well before the thought of tighter policy crosses the market’s radar. After holding rates too low for too long earlier this decade, the Fed does not want to inflate any fresh bubbles, if at all possible.
At this stage, gold and the dollar are the only two asset classes that look a bit bubbly. Given the US’s need to attract foreign capital, that’s a bubble the Fed can live with, for now.
