Must-Read: I see three things going on in Federal Reserve desire to raise interest rates once there is even half an excuse to do so:
- A desire to placate members of the FOMC who believe that what is good for commercial bankers must be good for America, and who see higher interest rates now as good for commercial bankers.
- A belief that the normalization of the unemployment rate ought to carry with it a normalization of interest rates.
- Excessive trust in models with shaky empirical foundations that predict rising inflation in 2017 and beyond. As I have said, for too many members of the FOMC rising inflation is as tangible and visible and real as the peanuts handed out in small 70-calorie packages by Southwest Airlines pursers.
My suggestion: the Federal Reserve should invite Lars E.O. Svennson to come to every FOMC meeting and speak first. And the Federal Reserve should listen to him:
The Fed: Being Goaded into Raising too Soon?: "All year... markets have been expecting the... Federal Reserve to begin... normalising interest rates...: