There is an online game that I strongly recommend for anyone who wants to know why the debate on whether or not the US Federal Reserve, or the ‘Fed’, will raise interest rates next week, is such a big deal. The game is called So, you want to be in charge of Monetary Policy?
You become the Fed Chairman and plan the future of the US economy. It’s good fun. Every time I have played the game, it has been with students in the training room, most of them got rejected for second term as Fed Chairman by the end of the game because their interest rate decisions worsened the economy. It always surprised them (and tickled me) when I normally got re-appointed to lead the central bank. The trick, which I would tell them later, is to hold. In the game, you get to raise or lower interest rates while you get hit by unexpected news, and the impact on inflation and employment is quite a learning experience.
When in doubt, hold. And that’s exactly what the Fed has been doing for almost a decade now.