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Message
re: Fed potentially raising rates
Posted on 10/7/17 at 7:33 pm to GoIrish02
Posted on 10/7/17 at 7:33 pm to GoIrish02
quote:
She's not making decisions based any sort of economic logic
That's an overstatement, but I would agree that the current FOMC logic doesn't make sense in terms of taking into account the bigger picture. It's difficult to really blame any person in particular, due to the Fed's "dual mandate." From the FRB of Chicago ( LINK):
quote:
In 1977, Congress amended the Federal Reserve Act, directing the Board of Governors of the Federal Reserve System and the Federal Open Market Committee to "maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates."
Traditionally (or for the last 20 years or so?), that "stable prices" part has been interpreted as 2% inflation targeting for PCE (personal consumption expenditures), but the Fed ought to get rid of that artificial target, because it doesn't fit the current environment.
Finally, while I don't think Yellen is playing politics, it's also true that you cannot completely separate political viewpoints from monetary policy considerations. If your political viewpoint leads you to suspect that a necessary correction might blunt some of Trump's short-term ability to implement destructive economic policies, then you might be subconsciously inclined to time your decisions sooner rather than later. It doesn't even have to be intentional, but your filter for interpreting economic news can be different depending on how you judge expectations of political policy changes.
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