Markets' Focus on Timing of Fed Hike Is a Distraction

It is unfortunate to see market participants and observers obsess so much over the exact timing of the Federal Reserve’s next interest rate hike. Speeches and comments by Fed governors and regional presidents are dissected for any hint: Will it be next week or will central bankers wait until December?

Although this focus creates unnecessary financial volatility -- especially the closer we get to the Sept. 20-21 Open Market Committee meetings -- a calm examination of lasting drivers of economic activity and asset prices tells us that the timing of the next rate hike shouldn’t matter that much. Moreover, the extent to which the Fed can have an impact on economic and financial prospects depends on a much broader array of factors, an increasing number of them outside the central bank’s direct purview.