At 2pm Wednesday we get the Federal Reserve’s minutes from the last meeting at the end of January.
As many Fed governors and presidents have said since, look for more jawboning about raising rates “sooner, rather than later.”
Of course this is just that jawboning. The Fed will point to inflation is rising just above its 2% target. However the true inflation rate is north of 3.5%, but that’s only the price increases we pay, not what the Fed is looking at. Curious that the fed will not directly say this, but since wages are flat at best for most of the country, the price inflation is shrugged off as unimportant.
The Fed has maintained that it will give the markets fair notice on a rate hike, so this is what all the chatter is about. March’s meeting will be more of the same as the Fed will not raise rates for the simple fact that it would increase the Treasury’s cost of borrowing at a time where far more paper debt will be generated to pay for President Trump’s infrastructure costs and tax cut policy.
For the short-term Janet Yellen’s Fed will try to be accommodating to the White House on fiscal matters, since its monetary policy has not sustained any economic growth in the last eight years.
The Obama Administration never really came out with an economic growth strategy, they were more inclined to move people onto the government dole via food stamps and Social Security disability programs than create jobs. So while Yellen and Trump may not be best buds, the chairwoman has to be breathing a sigh of relief that the White House is looking to take back fiscal matters and perhaps move the eggheads of the Fed back to the shadows were they belong.
The Federal Reserve should not be driving the economic engine of the country. At best it should be reacting to what the economy is doing with its rate policy.
Unfortunately for the last eight years, it has been the Fed not Treasury or Labor or Commerce that was looking at employment for Americans.
Yes the Fed has a mandate to help achieve full employment — whatever that means — but the Fed does not create jobs and has no mechanism to do so. Only through its lending rate can it make it conducive for employers to hire with low interest rates.
However, since the Obama White House had no plans for creating jobs, private companies took Yellen’s cheap money and bought stock to goose its books and did very little to hire anyone. That is unless you were a waitress or bartender or working in home health care industry.
So look for more jawboning in the statement Wednesday, but also look for the out clause, which will signal that March may be, but not really, on the table.