US monetary policymakers are exacerbating long-term uncertainty through their continued focus on short-term market movements, according to AllianceBernstein (AB).
The Fed's decision in June to hold the overnight cash rate steady despite economic conditions that would support a rise “coming together” was a prime example, said AB's director of global economic research, Joe Carlson.
Mr Carlson said the US Federal Reserve has used a short-term focus to steer policy decisions “for some time”, adding that the most recent labour market data shows the June decision was guided by “misplaced” concerns.
“Policymakers should no longer operate under the oppressive ‘shadows’ of the financial crisis, thinking that any weak number will be followed by another and another weak data print," he said.
“Time and again, the financial markets, the labour markets and the economy in general have shown their resilience."
Mr Carlson noted that more than seven million jobs have been generated in the US since 2013, while the jobless rate declined to 4.9 per cent and housing and equity prices climbed by 15 per cent and 30 per cent respectively.
Despite this, the Fed has only increased rates once, by 25 basis points to 0.375 per cent, and according to Mr Carlson this is leading to a lack of clarity for the long-term.
“The biggest obstacle to a clear path forward is the hesitancy of monetary policymakers,” he said.