The Federal Reserve: False start
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The Federal Reserve
The Fed should wait until inflation is closer to target before raising rates
THE last time the Federal Reserve raised its benchmark interest rate, there was no one to tweet about it. That rise, in June 2006, predated Twitter’s public release by a month. Nine years on, as the Fed readies itself to raise rates again, the public debate between hawks and doves is much noisier. Markets reckon that the Fed will raise its benchmark rate at least once this year, from the 0-0.25% range it has targeted since December 2008—and perhaps do so as soon as its next rate-setting meeting on September 16th-17th. But here, it does not pay to go early: a rise now would needlessly risk America’s recovery.
On the face of it, the case for a rise looks perfectly respectable. The American economy is at its fittest in more than a decade. It grew at a 3.7% annualised pace in the second quarter of 2015; after a brutal period of post-recession deleveraging, consumers are spending again. Firms have been …
Source: The Economy