FT opines that now is not a good time for the Federal Reserve to hike rates

Author: Eamonn Sheridan | Category: Central Banks

Everyone's got an opinion. Even the Financial Times.

Just because it seems inevitable does not mean it is a good idea

Having in effect deferred a rate rise in the autumn in response to the international financial turmoil at the time, the calmer external environment has seemingly persuaded the Fed to hike.

On the face of it, the decision to raise the federal funds rate looks strong

Circumstances, however, are not normal, and historical standards are not necessarily applicable. Year after year, the Fed - along with most forecasters - has overestimated inflationary pressure, suggesting either a miscalculation about the economy's output capacity or something even more fundamental going wrong

So, the FT doesn't think a hike is a good idea. But ...

Having come this far in signalling that interest rates are about to rise, it would probably be more disruptive if the Fed sat on its hands on Wednesday than if it moved.

So, what they need to do is:

Yet at the very least it should do its utmost to make clear that this is not the first in a series of preordained interest rate rises.

Well, D'uh.

Thanks FT.


The FT article is gated

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