Those of us who remember being strangled by Volcker in the late 70’s while Carter dithered are happy to have someone who understands the capital markets better then the Fed chairman at the helm of the country.
They did it on purpose to damage Trump.
Look forward to the them doing it again in 2020.
If a Fed Funds rate of 2.25% is strangling the economy, then it couldn’t have been very robust to begin with.
Jerome did a stupid move that caused many companies to decide to not expand.
But there are two other reasons the economy is not overheating:
Labor shortage. Atlanta is tyypical of many Red states and low tax states. The demand for housing far exceeds supply. Construction cannot keep up with demand due to the lack of people willing and able to do construcgtion work.
The demand for people willing and able to do IT far exceeds the supply.
Trade uncertainty. The Trade War has less impact than the labor shortage. But the Trade War creates uncertainty. small young companies can handle risk. But most corporate managers are risk averse.
Trump is completely wrong about this.
Inflation had been running over 2.5% for most of 2018 when the Fed made its last 0.25% hike in December.
Over the last five months, inflation has dropped to near zero.
I think the Fed’s timing - for the last hike and for the current pause - has been quite good.
The current Fed Funds rate is 2.50%. That’s just 0.75% above the rate one year ago.
In my opinion, most professional investors and corporate executives do not make significant changes to their long term strategy based on a 0.75% rate increase.
I would also point out that long term rates are still very attractive.
The Ten Year Treasury Bond is 2.4%.
That is just 1.0% above the all time historical low of 1.4% in July 2016.