Weening a country, or market, off easy money is tricky, even when it’s done slowly, as the Federal Reserve is doing. The removal of monetary accommodation is not made any easier by protectionist threats and counter threats that complicate the macroeconomic mix, roil markets and tighten financial conditions.

A reconstituted Federal Reserve under new leadership will face tough challenges in the year ahead. Monetary normalization is well underway, with the Federal Open Market Committee (FOMC) having raised the Federal funds rate five times since it left the zero lower bound two years ago and started shrinking the bloated balance sheet built up through three rounds of bond buying.

U.S. monetary policy morphed dramatically to a “new normal” of persistently depressed interest rates since the 2008 credit crisis, but with the advent of a dynamic new administration, the Federal Reserve may have to move back toward old normal.

Uncertainty breeds caution, and there is plenty of both at the Federal Reserve these days. Hence, the Fed’s “gradual” path of interest rate hikes continually gets more gradual.

Nearly as important as monetary policy, is policy communication, and the Fed’s messaging is not getting any easier to interpret.

It’s not just a new year; it’s a new era for monetary policy. Or is it?

Although Federal Reserve Chair Janet Yellen said she and her colleagues will probably start raising short-term interest rates “sometime later this year,” the timing of initial rate hikes remains uncertain...

Fewer things are more important to Federal Reserve policymakers than clear communication to financial markets about their interest rate intentions.