Don’t stop worrying

The US inflation scare seems to be over. For a few days after September 18, when the Federal Reserve Board cut the overnight interest rate by half a percentage point, the central bank’s anti-inflationary credentials seemed to be under threat. But bond yields, which had jumped up by 15 basis points, have since fallen back to pre-cut levels. There are several reasons for the fast return of faith in the Fed. To start with, the Fed’s firm rejection of accusations of laxness helped investors put a n...