Fed Raises Interest Rates Again, Based on Nothing in Particular

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.

Well, the Fed has gone ahead and raised interest rates, as expected:

“The labor market has continued to strengthen,” the Fed said in an upbeat statement published after a two-day meeting of its policy-making committee. The Fed added that economic growth “has been rising moderately so far this year,” making no mention of the reported weakness last winter.

Hmmm. Both GDP growth and new job creation have been modest over the past year. The unemployment rate is down, but it’s increasingly looking like the headline unemployment rate is not a great measure of labor tightness. Here’s a couple of other measures. First, hourly wages of production workers:

Ordinary workers did pretty well in 2015, but it’s been all downhill since then. Over the last few months, their earnings have barely risen at all. That’s hardly consistent with a tight labor market.

And here’s the core PCE inflation rate, the Fed’s favored measure of inflation:

It’s nowhere near the Fed’s target of 2 percent, and if you can see any acceleration in this chart you have sharper eyes than me. It looks dead flat at around 1.6 percent for the past four years. That’s also hardly consistent with a tight labor market.

The economy is doing OK, and perhaps that’s the best argument in favor of the Fed’s strategy: they’ve been slowly raising interest rates and the economy hasn’t fallen off a cliff. On the other hand, the labor market for the working and middle classes sure doesn’t look especially tight. Inflation isn’t rising and wage growth has been anemic.

It’s hard to see how raising interest rates is doing anybody outside the top 1 percent any good. I sure hope Janet Yellen knows what she’s doing.

We've never been very good at being conservative.

And usually, that serves us well in doing the ambitious, hard-hitting journalism that you turn to Mother Jones for. But it also means we can't afford to come up short when it comes to scratching together the funds it takes to keep our team firing on all cylinders, and the truth is, we finished our budgeting cycle on June 30 about $100,000 short of our online goal.

This is no time to come up short. It's time to fight like hell, as our namesake would tell us to do, for a democracy where minority rule cannot impose an extreme agenda, where facts matter, and where accountability has a chance at the polls and in the press. If you value our reporting and you can right now, please help us dig out of the $100,000 hole we're starting our new budgeting cycle in with an always-needed and always-appreciated donation today.

payment methods

We've never been very good at being conservative.

And usually, that serves us well in doing the ambitious, hard-hitting journalism that you turn to Mother Jones for. But it also means we can't afford to come up short when it comes to scratching together the funds it takes to keep our team firing on all cylinders, and the truth is, we finished our budgeting cycle on June 30 about $100,000 short of our online goal.

This is no time to come up short. It's time to fight like hell, as our namesake would tell us to do, for a democracy where minority rule cannot impose an extreme agenda, where facts matter, and where accountability has a chance at the polls and in the press. If you value our reporting and you can right now, please help us dig out of the $100,000 hole we're starting our new budgeting cycle in with an always-needed and always-appreciated donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate