Thursday, March 17, 2016

The Fed's Postponement of Liftoff Suggests Loosening of Domestic Policy Objectives

The Fed, whom until recently had convinced the public that the US economy was strong enough to withstand rate hikes, is now worried that global economy (and financial system) too weak to handle US rates hikes and a stronger dollar.  The Fed's mandate, the management of domestic price and employment levels relative to targets (1,2), has once again been expanded to included international considerations.

The abandonment or loosening of domestic policy objectives in support international interests (friends), a continuation of the postponement of liftoff in September 2015, is a standard behavioral response to growing political, social, and economic strains.   

Headline: Fed passes on rate hike, cites global risks and projects fewer rate increases in 2016

The Federal Reserve left interest rates unchanged on Wednesday, acknowledging risks abroad and growth in the U.S. economy
Following its two-day policy meeting, the central bank voted to keep its benchmark interest rate between 0.25% and 0.50%. One member of the committee, Esther L. George, voted against the decision, preferring to raise the federal funds rate to 0.50% to 0.75% at this meeting.



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