Posted on 12/22/2018 5:52:48 AM PST by Kaslin
The U.S. economy is in remarkably good health, and the Federal Reserve risks upsetting the apple cart with its unjustified interest rate hike.
The Fed raised interest rates by .25 percent at its December 18-19 meeting, a move that President Trump rightly called “foolish” in light of his ongoing trade negotiations with China and other major U.S. trade partners.
The President makes a good point. Since a stronger dollar makes U.S. exports less competitive and tends to increase net imports, higher interest rates threaten to undermine the value of the targeted counter-tariffs President Trump is using to get China to negotiate a fair trade deal — a strategy that has already paid off with respect to Mexico and Canada, and South Korea.
The President has also pointed out that hiking interest rates could carry risks for the U.S. economy in the event that developments in Europe or elsewhere — such as the ongoing Brexit negotiations or the anti-government protests in France — cause a negative shock to the world economy. If that were to happen, interest rates could mean the difference between an economic slowdown and a recession.
Economic reports released just one week ahead of the Fed’s next meeting, moreover, presented a strong case for keeping interest rates at the previous target range of between 2 and 2.25 percent.
By law, the Fed is only supposed to change interest rates in order to stabilize prices or maximize employment — rates go up to keep the economy from overheating if unemployment is too low or inflation is too high, and they go down if an economic slowdown causes high unemployment or reduces the inflation rate.
The latest Consumer Price Index (CPI) data show that the cost of living remained flat in November, pushing inflation down to just 2.2 percent over the preceding 12 months. That’s almost perfectly consistent with the 2.1 percent inflation rate recorded in both 2016 and 2017, which is only slightly above the Fed’s target of 2 percent inflation.
Raising interest rates at this point is likely to put too much downward pressure on inflation, which in turn would put a leash on economic growth in the near future.
The unemployment rate has also leveled off recently, after plunging to a 50-year low of 3.7 percent over the course of Donald Trump’s presidency. November marked the third straight month that unemployment remained stable, arguing against fears that the economy is overheating.
Some analysts have speculated that rising wages — average hourly pay has increased 3.1 percent over the last 12 months — might have formed part of the Fed’s rationale for raising interest rates, since higher consumer spending could theoretically push prices up. Yet, while wage growth has certainly been solid, it’s merely been keeping up with the growth of the overall economy, which is on pace to exceed a GDP rate of 3 percent for the year.
Given that both unemployment and inflation have stabilized at levels that are indicative of a strong, healthy economy, it was premature for the Fed to raise interest rates in anticipation of inflation that may never materialize.
If wage gains do end up exerting inflationary pressure, the effects likely won’t be felt for months, at which point the Fed could have simply reconsidered an interest rate hike at its next quarterly meeting. If the inflation predictions turn out to be wrong, though, raising interest rates now might actually be damaging to the economy.
President Trump was right: raising interest rates at this point was foolish. The Fed should have heeded the President’s sound advice.
The Fed did it to try and make President Trump look bad...That’s it in a nutshell...
The FED is the penultimate Swamp Denizen. ‘Nuff said.
Hating Trump isn’t enough of a reason?
I agree! That was my FIRST THOUGHT!
Just another example of the size, length, breadth and depth of the cabal out to ruin the Trump Presidency!
Make no mistake about it, the Ruling Elite Establishment HATES Donald J. Trump, and no trick, no method, no evil deed is off the table to destroy the man and his family and his administration!
BY ANY MEANS NECESSARY, INDEED!
I have said it before, and I’ll continue to say it:
If you voted Democrat in 2016 or 2018, you voted AGAINST America!
POTUS needs our support!
Please send him an email at https://www.whitehouse.gov/contact/.
Let him know you have his back!
If the fed wants to continue screwing with President Trump he just might consider floating the idea of an audit of the fed, wonder if that might get their attention.
Yet, while wage growth has certainly been solid, it’s merely been keeping up with the growth of the overall economy,
...
Wages also have to catch up with the inflation that’s already happened.
The Fed has been suppressing wages for decades.
Everything is political and every move by the deep state is anti Trump and anti American worker.
The cost of credit is too high. People with very good credit ratings getting solicitations with APRs of 22% for purchases? BS. And these are from the majors.
The Fed is only responsible to the member banks, not to the public, not to government, which means it can and often does work counter to the best interests of the country.
There’s no reason why the federal government should have the authority to set rates that banks pay or charge for the use of money. That is a controlled economy, which the USA, being a “free market” country, doesn’t have.
This is part of the seep swamp to take down DJT. Get his popularity down to try to make impeachment stick. The criminals have run the government and money system so long they think they can so anything and have the lack or ethics to do anything. Agenda 21 wants to kill off 85% of the population so anything goes.
Not to them.
Can the Federal Reserve be part of the anti-Trump movement?? From someone outside the box, it looks like Wall Street is being manipulated by anti-Trumpers. Possible???
Yep... They are the worst enemy this country could ever have hiding in plain sight.
Looking through a lot of your previous posts, I have come to the conclusion that you are a liberal troll...
Weren’t the tax cuts supposed to bring us 5-6% growth? Can that type of growth really be stymied by a 25bps move by the Fed?
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