Central banks’ job is to manipulate – that’s why they exist. US President Donald Trump chides others for doing their job, but has been pressing for his own central bank, the Federal Reserve, to manipulate harder.
He wants the federal funds rate down, which has spurred rises in the share indices, while the country’s public debt continues to spiral northward. The US Debt Clock website shows public debt at $US22.39 trillion and the US budget deficit closing in on $US1.01 trillion.
The Fed lifted its federal funds rate target range last September to 2-2.25%, and to 2.25-2.5% in December. Yesterday, the bank held its funds rate at that level , with one dissenting voice. Federal Reserve Bank of St. Louis president & chief executive James Bullard wanted a 25-point cut.
This is how the Fed saw the current state of play:
“Information received since the Federal open market committee met in May indicates that the labour market remains strong and that economic activity is rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low.
“Although growth of household spending appears to have picked up from earlier in the year, indicators of business fixed investment have been soft. On a 12-month basis, overall inflation & inflation for items other than food & energy are running below 2%. Market-based measures of inflation compensation have declined; survey-based measures of longer-term inflation expectations are little changed.”
Looking ahead, it said: “The committee continues to view sustained expansion of economic activity, strong labour market conditions & inflation near the committee’s symmetric 2% objective as the most likely outcomes, but uncertainties about this outlook have increased…
“In determining the timing & size of future adjustments to the target range for the federal funds rate, the committee will assess realised & expected economic conditions relative to its maximum employment objective & its symmetric 2% inflation objective.”
Attribution: Fed release.