The US Fed has raised interest rates. Let's not get overwhelmed: the range is now 1 to 1.25%.
But, let's ask why. The US is not facing an apparent inflation threat. QE has not delivered price increases as all the hawks said it would. Nor is the US economy over-heating on any measure bar climate abuse.
So why increase rates now when there is no apparent need to do so? This may be a tad controversial but I think the answer is that Yellen is making sure Trump can't go out of control. He threatens the Federal budget; his spending plans are disproportionate whilst offering little real return to the economy, and so his reckless inclinations are being curtailed in advance. This rate rise is, then, the US establishment fighting back.
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I’m not so sure. I think it’s more to do with the fact that they need to “normalise” interest rates in preparation for the next downturn. If rates are at 1% they don’t have any scope for cutting them, so they’re trying to get ahead of the game.
They have said QE does the job perfectly well if rates are low
This cannot be the reason in that case
Could also be that the Fed is trying to create the ‘illusion’ that there is something left in the ‘tool box.’
I doubt it
Not sure what you mean Richard by Trump going ‘out of control’ with spending as he seems to be in favour of massive cuts to social security and ‘bureaucratic’ departments (environment etc)-I assume you mean th proposed spending on defence and the border wall, yet the infrastructure model seams to be one of private investment and a ‘toll’ appraoch rather than federal spending. That’s my impression from bit’s I have read, so might be very inaccurate.
His deficit spending will be out of control based on the planned cuts
That is what I meant
Apologies