As previously noted, the Fed are raising interest rates:
by Patrick Gillespie | March 15, 2017: 2:33 PM ET
The Federal Reserve raised its key interest rate by 0.25 percentage point on Wednesday. It was just the third time that the Fed has increased rates since the financial crisis.
That raises the Fed’s target for short-term interest rates to a range of 0.75% and 1.00%.
The move was widely expected after last week’s strong jobs report and Fed Chair Janet Yellen’s comments that a rate hike was “appropriate.”
A rate hike is a sign that the Fed is confident about the pace of growth in the U.S. economy. The Fed placed its key interest rate at 0% in December 2008 to resuscitate the collapsed housing market. But a little over eight years later, the U.S. economy is in much better shape and has grown, albeit slowly.
“The economy continues to expand at a moderate pace,” Yellen said in a press conference.
There’s more at the original, and that story may well be updated throughout the day.
Here are the Fed’s economic projections:
— Heather Long (@byHeatherLong) March 15, 2017
Other than their 2018 GDP growth and 2017 Core PCE inflation projections, the Fed did not change any of their forecasts. Yet, as we have previously noted, the Fed got their GDP projections for 2016 very wrong, and got them wrong in mid-December of 2016! The Fed projected 2016 GDP growth at 1.9%, but not only did the initial 2016 numbers show only 1.6% real growth, the Commerce Department’s Bureau of Economic Analysis second estimate, released on February 28th, was the same: 1.6% real growth for 2016.
Why, then, ought we to have any confidence in the projections of the Fed for accuracy, when they couldn’t even get right a year in which 11½ months had already elapsed?
Various Federal Reserve officials have already said that they see little need for further ‘stimulus’ spending, and Governor Lael Brainard indicated that the FOMC might seek to raise interest rates if President Trump’s policies focus on stimulus. While I happen to agree that ‘stimulus’ spending is not a good or effective thing, it’s becoming clear that the Fed are not being apolitical, but are actively attempting to fight President Trump’s economic policies, and that is definitely not their job. If the government are going to try to use some form of stimulus program, such as the President’s suggested $1 trillion in infrastructure programs, that is the decision of the Congress and the President, and not something that the Fed has any legitimate right to fight.
So, what has happened? With a completely unnecessary increase in interest rates, the Fed have just made any stimulus program by the government more expensive, by increasing the rates for whatever money the government borrow.