The Fed’s Next Move

The NYTimes editorial board echoes Fed Up on the recent rate increase:

“At least for the short run, the Federal Reserve’s interest rate increase has created one clear winner: the banks. When the Fed announced on Wednesday that it would raise its benchmark rate to a range of 0.25 to 0.5 percent, banks raised the rates they charge on many loans but not the rates they pay to depositors. That widening spread means higher bank profits.

But it is hard to see how the increase will benefit the economy as a whole. The unemployment rate has held steady recently, at 5 percent, but the underemployment rate — which includes the unemployed, part-timers who need full-time work and jobless workers who have apparently given up looking — is still at nearly 10 percent.

One result of those slack conditions is that pay raises for most workers are still few and far between. With no evidence of inflation in wages or in consumer prices, there was simply no need at this time for the Fed to risk slowing the economy by raising rates.”

cc: Center for Popular Democracy

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