Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: mishedlo who wrote (17528)	12/3/2004 11:27:12 AM
From: zonder	Read Replies (2) of 116555

Why do you think the Fed is going to raise interest rates at the current economic environment? I see two possibilities: 1) Fed is wrong in its insistence to raise rates. This means they are idiots, don't understand the data, and/or have malicious intent to harm the country. 2) Fed is right to raise rates. This means there is something about the country's economic status quo that you are not evaluating correctly. To me, the correct answer is (2), and what you do not seem to be taking into account is the INFLATION DATA. You know, PPI and CPI which were 4.4% and 3.2%, respectively, in October. Meanwhile, Fed funds rate is at 2%. How can you not understand why the Fed is raising interest rates? Also re this: With the FED nearly guaranteed to hike rates at the next FOMC even in the face of piss poor jobs report... Interest rates are not a tool to boost employment. If you look at a table of interest rates and unemployment through time, you will be amazed at the lack of correlation between the two. Rates are an efficient tool to control INFLATION, however. That is why Fed is nudging them up slowly, towards neutral. There is nothing bizarre about this, Mish.

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