And Here We Go

At least this time, Federal Reserve only raised interest rates by 25 basis points (¼%).

This will continue, of course, even though evidence is that inflation is approaching their 2% target:

The Federal Reserve nudged up short-term interest rates by a quarter-percentage point and signaled it was on track to do so again at its meeting next month while officials consider whether and when to pause increases late this spring.

The decision Wednesday to raise the Fed’s benchmark federal-funds rate followed six larger, consecutive increases to combat inflation, which hit a 40-year high last year. Officials raised rates by a half point in December and by 0.75 point in November.

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The latest increase caps a year in which the Fed lifted the fed-funds rate from near zero to a range between 4.5% and 4.75%, a level last reached in 2007, extending the central bank’s most rapid interval of rate increases since the early 1980s.

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But consumer spending has moderated, and manufacturing activity has declined, an indication of weakness extending beyond the hard-hit housing sector. “Markets have essentially ignored the Fed meeting and are reacting to those data,” said Mr. Singh.

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Inflation fell to 4.4% in December from 5.2% in September, as measured by the 12-month change in the personal-consumption expenditures price index excluding food and energy. Though still above the Fed’s 2% goal, it moderated in the October-to-December period to an annualized 2.9% rate. But prices in the narrow category of nonhousing services rose 4% in December over both the past year and at a three-month annualized rate.

The Fed will continue to double down on the rate hikes because there is no downside for them to cause a recession.  The incentives mitigates against them taking their foot off the break, so they are following their incentives off of a cliff.