The Fed's Real Test Is Credibility, Not Timing

The debate over whether easing begins this meeting or next misses the larger point.

Credibility Is the Asset

A central bank's most valuable possession is the market's belief that it will do what it says. That belief:

• Lowers the cost of policy by moving expectations in advance.
• Buys flexibility during genuine shocks.
• Is slow to build and fast to lose.

The Bottom Line

Getting the timing slightly wrong is survivable. Losing the anchor is not.