Holiday traditions: The Fed finally manages to lift rates in 2016

Posted: December 15, 2016 in economy
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TODAY, finance and economics journalist gathered for a long-awaited Federal Reserve announcement: that the Fed's benchmark interest rate would rise once more, by 25 basis points, to a range between 0.5% and 0.75%. If the scene looked familiar, well, no surprise there. It was December a year ago that the Federal Reserve announced another increase in its benchmark interest rate, of 25 basis points—the first in nearly a decade. It was also December a year ago that Fed projections suggested that rates would soar upward in 2016, to close to 1.5% by year's end. The Fed has repeated that tradition as well; the projections published today repeat last year's heroic call, of a rate near 1.5% one year hence.Whether the third act of the holiday tradition—an inevitably disappointing performance of inflation and wage growth, which forces the Fed to abandon all but one of its expected rate hikes—will also be repeated remains to be seen. In some important ways, conditions this year are not all that different from those which prevailed in late 2015. The unemployment rate is a few tenths of a percentage point lower. Inflation remains below the Fed's 2% target. Global economic growth is plodding along. Perhaps most important, interest rates around the world remain at historically …

via Economic Crisis


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