re: Is the role of the Fed to "stimulate the economy"?

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that December rate hike took the steam out of the economy

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If raising overnight bank borrowing rate by .25% from 2.25% to 2.50% takes "steam out of the economy" then the economy was shite to start with.

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Driving the economy is a bit like controlling the economy, and to have a federal agency control the economy is, well, communist.

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Sorry but the Feds role is to control the economy. Like it or not. And I don’t like it.

From the Feds own website:
The Federal Reserve System is the central bank of the United States. It performs five general functions to promote the effective operation of the U.S. economy and, more generally, the public interest. The Federal Reserve

conducts the nation’s monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy;
promotes the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad;
promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole;
fosters payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments; and
promotes consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.

It was created in 1913 when the Great Progessive President Wilson signed it. The progressives decided after the Panic of 1907 that the cyclical boom and bust of the economy needed to be artificially flattened. Highs and lows.

In my opinion they can only depress the economy but are powerless to stimulate it. Look at Japan and Europe for examples!

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Negative. The fed overshot 50BPS last fall. It allowed commensurate throttling (aka economic damage) to persist for 6 months despite extremely low inflation rates.

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So if it maxed at 2.5% (I don't agree but I will play along) and they have reduced it to 2.25% already... then they just need to get it back to 2.0%, or if you think we need to overcorrect, 1.75%.

That's at most, another half point, not a full point.

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Further, a large spread vs Europe, with rates even exceeding Greece, Italy, etc. makes no sense.

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Greece, Italy, etc, are really in the shitter. Are you saying our economy is as bad as theirs, and we need rates as low as theirs?

I think they overshot by 25BPS, not 50. And they gave the 25 back. I could see them giving another 25 back. But that's it given current conditions. Anything more is an admission that the economy needs help.

Fun fact: just in March, the Trump team released a new economic assumptions doc.

Anyone want to guess what their 3-month tbill projection was, to go along with 3.1% RGDP?

Would y'all expect it to be higher or lower than what it actually was for July?

The Fed also gave guidance, IIRC, that more rate hikes might continue.

And reading this thread, I'd say quite a few of the posters should understand economics and the Fed as institution before making comments. If you can't state the mission of the Frd correctly, how can you say you're against it.

No one is mentioning the $60b per month that the Fed is buying back from 8 years of QE.

They got way ahead of their skis the second half of 2018 trying to have the economy absorb that reduction in liquidity along with multiple interest rate increases

I recognize they were trying to get their fiscal house in order after 8 years of full stimulus. Problem is, it is hard to do both at the same time without hurting the economy. That process should have started two years prior, but Yellen didn’t want to crash Obama’s crap economy

Soooo sports fans, who can tell me how many countries are left in the world without a central bank?









Bonus points for naming these countries.

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They weren’t AT the goal, reacted prematurely and went to far on the rates.

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Yeah I agree with the position that they shouldn't fear a minor inflation overshoot so much, and should probably wait until consensus that the target inflation was hit.

But in their defense, it doesn't turn on a dime in response to fed policy, so waiting until then would have incurred an overshoot of uncertain magnitude, particularly if the economy is truly as hot as the president claims it is.

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Inflation is substantially below targets.

Inflation was under control last year as the Fed drove rates up.

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I rarely disagree with you but the facts are in 2018 the annual inflation rate was 2.44% which is substantially higher than the Fed's stated goal of keeping inflation under 2%. (Remember, when Nixon imposed Federal wage and price controls the annual inflation rate was only 3% which was considered "runaway inflation" at the time.)

The annualized core inflation rate for 2019 is 1.8% so it's time for the Fed to stop raising rates, which is what they've done although the latest inflation forecast for next year is 1.9%.

FWIW, the Board seems to prefer to use PCE inflation over CPI, which wasn't quite so high as the CPI's 2.44%. It was only 2.1%

eta: "the Board" = the Fed Board