The next two weeks are the traditional holiday "dead time" in the markets (bond-market people use such cheery metaphors all year 'round), and so the passage of an extraordinary transition this week has been lost on vacation. Like your luggage, to be found in January. The Fed's statement after its last 12 consecutive meetings said that it had acted to "remove excess accommodation." After the 13th, on Tuesday, raising its rate again to 4.25 percent, the Fed removed the phrase itself. Long-term mortgage rates promptly fell. The Fed has been on automatic pilot for 18 months, one drip-drip quarter-point at a time, each hike as surprising to the markets as that day's sunrise. The automation made sense: at a 1 percent overnight cost of money, the Fed had successfully intercepted the risk of deflation 2002-2004, and everyone understood that the Fed could no longer allow that free-money lending. The only question was where the Fed would stop. Not even the Fed knew that, nor does it know now --...
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