On Wednesday the socialist central planning agency that has bedeviled the market economy for more than a century held one of its regular meetings. Thereafter it informed us about its reading of the bird entrails via statement (one could call this a verbose form of groping in the dark).
Modern economic forecasting rituals.
A number of people have wondered why the Fed seems so uncommonly eager all of a sudden to keep hiking rates in spite of economic data in Q1 indicating surprising weakness in economic output (of course they once again didn’t hike rates, this time).
We have long suspected that the real reason for the urge to hike is to accumulate “ammunition” for the next downturn. After all, it really shouldn’t make much of a difference where the federal funds rate is; the federal funds market is basically dead anyway, and the Fed continues to refrain from shrinking its balance sheet (i.e., bank reserves will remain elevated, and the Fed won’t actively exert pressure on money supply growth).
Then again, the statement is actually in keeping with the orthodox (largely Keynesian) view of the economy and the central bank’s presumed tasks. There is actually no need to take it at anything but face value. The complete statement can be seen here, but we want to focus on one particular excerpt – which follows an enumeration of various data points in paragraph one:
…click on the above link to read the rest of the article…
