Fed’s Decision Reflects Difference in U.S. vs. Global Economic Performance
Despite very low domestic inflation by the weight of all economic evidence, the Fed’s FOMC should have raised the federal funds rate by now.
But, again they paused at the meeting ending on September 17, citing global economic concerns.
These concerns are quite real.
China is wallowing in mediocre performance exacerbated by the bursting of both real estate and stock market bubbles. Europe is just eking out positive growth being dragged along by better-than-expected German performance. The emerging markets, except India, are not emerging but rather are submerged in recession or subpar growth.
Globally the news is not good.
U.S. performance, on the other hand, is now broad-based and rather strong. There are laggards (like Connecticut), but overall growth is moderate to strong in many sectors, with substantial job demand and steady if not spectacular hiring.
Consumer budgets are helped with low inflation and increasingly lower energy prices. We are the world’s economic engine.
The Fed does not want to be blamed for causing that engine to shift into lower gear.
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