Jacquelyn Martin/AP Photo
Federal Reserve Chair Jerome Powell speaks during a news conference earlier today at the Federal Reserve Board Building in Washington.
The Federal Reserve Board’s policy-setting Federal Open Market Committee, as expected, raised short-term interest rates another half-point. In the Fed’s official statement, there was no acknowledgment that inflationary pressures have been easing. Even the lower-than-expected increase in the Consumer Price Index, released yesterday, tempered neither the Fed’s action nor its rhetoric.
On the contrary, the Fed doubled down on its explicit commitment to bring inflation all the way down to 2 percent, a level that more and more economists consider unnecessary and unattainable except at grave costs to the real economy. But the statement flatly declared, “The Committee is strongly committed to returning inflation to its 2 percent objective.”
The Fed also explicitly committed itself to further rate increases: “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”
The Fed’s target short-term interest rate is now set at 4.25 to 4.5 percent, the highest that it’s been since 2007. Median GDP growth is projected to be just 0.5 percent this year and next, or just above recession level.
Even worse, the vote was unanimous. Although some members of the FOMC, such has Fed Governor Lael Brainard, Boston Fed President Susan Collins, and Kansas City Fed President Esther George, have spoken of the need to temper the Fed’s ultra-hawkish rate hikes, all of them voted for today’s action. In the Fed culture, the peer pressure against dissent is immense.
The Fed forecast that the Personal Consumption Expenditures price index (its preferred inflation index), slightly different from the CPI, will still be at 3.5 percent next year, and 2.5 percent in 2024. That’s above their target of 2 percent—which is used as justification for the Fed to keep crushing the economy.
Speaking at a press conference immediately following the Fed’s two-day meeting, Chair Jay Powell said, with satisfaction, “Unemployment is projected to rise to 4.6 percent next year.”
“We are not at a sufficiently restrictive policy stance yet,” he added. “We still see a very strong labor market,” Powell said with regret.
He did hint that the Fed might be open to slower rates of increase, possibly a quarter-point at each meeting rather than a half- or three-quarter-point hike. This may have been a concession to the relative doves on the Open Market Committee.
Reporting on the Fed’s decision, Powell did not say one word about supply shocks. Given that supply constraints were the main drivers of inflation, that omission was appalling. Nor did the elite financial press—the reporters from The New York Times, Wall Street Journal, CNBC, Reuters, Financial Times—ask any questions on supply chains. Thus the echo chamber of the Fed culture, including the tame media that covers it.
Talleyrand is said to have remarked of the Bourbon dynasty, which was restored after the defeat of Napoleon, “They have learned nothing and forgotten nothing.” The Bourbons were open-minded compared to Jay Powell.
