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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: gpowell who wrote (9176)	7/14/2004 4:11:14 AM
From: zonder	Read Replies (2) \| Respond to of 116555

The federal funds rate certainly changes in relation to macroeconomic factors,such as employment levels As I showed in the previous post, the Fed does NOT change interest rates depending on the unemployment levels. It never has, and it never will. As well it should not - interest rate hikes control INFLATION, not UNEMPLOYMENT. As the data in my previous post shows, in periods of increasing interest rates, unemployment has actually DECREASED. This is because of the inverse relationship between inflation and unemployment (see Phillips Curve). Fed looks at unemployment as they look at any other economic indicator, but unemployment does not influence rate hikes, their amounts, and their timing. Which was the argument in the post I replied to.