Fed rate rise being signalled but data indicates no need to do so

For many economists in the financial sector expectations are high that the US Federal Reserve has done the right thing in raising interest rates today by 25 basis points. This will be the first rise since the days in 2009 when the rate touched bottom in response to the financial crisis. Ever since then the rate has stayed low in the zero bound to 25 basis points range. Many bankers and financial services firms are pushing for the rate rise. However the data does not show any need for this measure as inflation is still very low in the US and unemployment while very much improved could still fall well below the 5 % level before the rate should have been raised.This is particularly true in a global climate of falling oil prices.The Fed in its announcement suggests that they may well keep the rate at this new level for some time. Given the data to do otherwise would be a major mistake.

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About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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