Jobs Numbers Mean Fed Rate Rise In September At The Earliest

April 5, 2015 3:08 PM

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So goes the conventional wisdom at present. That the Federal Reserve wants to raise interest rates is well known. And for good reason they want to raise rates too. However, when to raise rates is the problem. Too soon and we risk a replay (in a different manner, history doesn’t repeat but the hiccups of it have a certain reminiscent flavour) of 1937, when a reasonable looking recovery was choked off by a return to policy normality too soon. Our problem is that we have to change monetary policy 18 months before the appearance of that inflation that we’re changing monetary policy to avoid. Which, given that prediction, especally about the future, is a difficult thing leaves us with a difficult decision.

A rise in June — still just possible given the rubric set out by last month — can surely be ruled out. September is the earliest possible date, and now looks unlikely. Even that would require a clear-cut recovery over the spring and summer. The Fed wants to raise rates, but it is telling the truth w...

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