17 September 2015

The Fed Does the Right Thing for Reasons that Are Totally Opaque to Me

For some reason, central bankers are always too quick to raise interest rates.

It's some sort of bizarre monetary dick swinging.

Everyone predicted that the Federal Reserve would raise interest rates, even though the workforce participation rate is the lowest that it has been since 1978.

It turns out that "everyone" was wrong:
One of the longest economic expansions in American history remains so fragile that the Federal Reserve said on Thursday it would postpone any retreat from its stimulus campaign.

Janet L. Yellen, the Fed’s chairwoman, described the decision as a close call and said the central bank still expected to raise interest rates later this year. The Fed has kept its benchmark interest rate close to zero since late 2008, when the nation’s economy was at the depths of crisis.

“The recovery from the Great Recession has advanced sufficiently far and domestic spending has been sufficiently robust that an argument can be made for a rise in interest rates at this time,” Ms. Yellen said at a news conference.

But, she said, “heightened uncertainties abroad,” including the Chinese economy’s weakness, had persuaded the bank to wait at least a few more weeks for fresh data that might “bolster its confidence” in continued growth.

The Fed’s decision, announced after a two-day meeting of its policy-making committee, had been widely expected by investors in recent weeks.
I'd try to explain this,but I do not have a f%$#ing clue as to why this happened, and if I did try to figure this out, all that I would get is a headache.


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