Fed Must Avoid Greenspan Trap

If global growth concerns make the Federal Reserve wait to raise short-term interest rates, the central bank risks falling into the “Greenspan trap” and contributing to long-term turmoil, one economist said Wednesday.

“The question is whether the Fed will fall into the Greenspan trap and pay too much attention to what’s going on internationally and not enough attention to what’s going on domestically,” said Samuel Rines, an economist and analyst at Chilton Capital Management.
Rines references former Fed Chairman Alan Greenspan, who led the central bank in the easy money era ahead of the burst of the housing bubble in the mid-2000s. As the Fed decides when to move from near-zero interest rates at its two-day policy meeting, it should worry about the effects of waiting too long, Rines contended in a CNBC “Power Lunch” interview.


Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza