Well, duh

WSJ:

If you think your job is tough, consider Federal Reserve Chairman Jerome Powell. He’s signaled for months that the Fed will raise interest rates again this week, but economic and financial signals suggest he should pause.

follow the signals that suggest a prudent pause in raising rates at this week’s Open Market Committee (FOMC) meeting. Get the monetary policy that best serves the economy

The case for pausing in its interest-rate march back to “normal” starts with the Fed’s mandate to control prices with low unemployment. There’s simply no sign of an inflation breakout.

The Fed’s favorite inflation measure, the PCE deflator, has been falling for months. The dollar is strong, both against gold and the world’s other major currencies. Gold sold for about $1,250 an ounce on Monday but six months ago it was about $1,300. Other commodity prices that are often inflation canaries, such as oil and farm products, are also down.

This is all in sharp contrast to the 2003-2005 period when the Alan Greenspan-Ben Bernanke Fed kept rates too low for too long. Then commodity prices like oil were rising sharply, and housing prices exploded.

hourly earnings rising at an annual rate of 3.1%. But this is what you’d expect in a healthy labor market that is adding about 170,000 new jobs a month and a jobless rate at a historic low of 3.7%.

There is also no sign of the “cost-push” wage inflation that the Fed staff so often frets about. Recall that by previous Fed calculations the economy had reached full employment two or three years ago. Yet stronger growth continues to pull more Americans into the job market. As Fed Vice Chairman Richard Clarida recently noted, productivity is rising at a 1.8% rate, which suggests further room for non-inflationary wage gains.

Meanwhile: “Light, sweet crude for January delivery slipped $3.64, or 7.3%, to $46.24 a barrel.”

The need for raising rates makes as much sense as the amount of CO2 in the air, i.e. 0%.

One Response to “Well, duh”

  1. feeblemind Says:

    re “Light, sweet crude for January delivery slipped $3.64, or 7.3%, to $46.24 a barrel.”

    The extent of the run up in Crude caught me by surprise. I expected higher prices but not as high as they went.

    Conversely, the speed and extent of the decline surprised me as well, though gasoline is usually at its cheapest this time of year.

    One wonders how much of the drop can be attributed to getting caught in the downdraft of the stock market slide?

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