The most important thing about tightening? How long, how long

  • At midday on December 16, the Fed will begin a tightening cycle.
  • The Fed is taking a huge risk, but in favor of prudence.
  • The risk is in the shock to businesses and households, where memories are short and it’s been a long, long time since the last time interest rates rose at all.

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At midday on December 16, the Fed will begin a tightening cycle, raising the overnight cost of money — the Fed funds rate — for the first time since 2004. Finance professionals in their thirties have had no firsthand experience with the event. This will be the ninth such cycle since 1955. The most important thing: how long (oh Lord), how long.