New leadership at the Fed invites questions about the efficacy of its interventions up to now and the possibility of a change in direction going forward. Throughout the financial crisis and well into the mediocre recovery that has followed, the Fed has exerted its full powers to bolster the real economy. Alongside investor risk-aversion, forward guidance on short-term rates and asset purchases have contributed to low yields on Treasuries. Whether these low yields have translated into much better real economic outcomes – or just lifted asset values – is not firmly established.

Low nominal and real interest rates are not ends in themselves. Unrestrained by current inflation, the ultimate objective of monetary policy has been the vaguely defined goal of full employment. Prima facie the central bank's record on this front hints at its constraints. The Fed will be the first to say the labor market recovery is incomplete. In comments earlier this week, Chairman Janet Yellen went so far as to dispense with economics, donning a more political hat to discuss the “real people behind the statistics.”

Without an observable counterfactual, we might reasonably conclude the Fed's recent support of labor markets is disappointing. There is significant slack in the real economy and it is entirely unclear if persistence by the Fed will have a beneficial impact in real terms. In fact, low rates may divert some capital to assets and away from productive investment. By the response of stock markets and debt-fueled investors, it is apparent that low interest rates are benefiting some segments of the market that are loath to see the Fed withdraw. Whether the Fed can meets its mandate with the current playbook -- in a way that justifies the attendant risks – is a question it seems unwilling to pose.