Fed Raises Interest Rates Again, Based on Nothing in Particular

For indispensable reporting on the coronavirus crisis, the election, and more, subscribe to the Mother Jones Daily newsletter.

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.

SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

payment methods

SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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