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Name:
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MartiniMan
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Subject:
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Just Curious
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Date:
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10/15/2018 10:09:20 AM
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The Fed sets it's guidance on a quarterly schedule. While a gross oversimplification, what drives their interest rate is primarily their target inflation goal. They look at the economic data and try to divine what inflation might do and if the economy is going strong they will usually raise rates to "cool" the economy off to stave off inflation. Having said that, the Fed also has a history of overreacting and overreaching and that is a bipartisan problem.
But the Fed doesn't make these decisions in a vacumn and takes a lot of data and guidance from the regional Federal Reserve banks. It's not at all uncommon for President's to not like what the Fed does. Obama was all for the quantitative easing (a fancy term for printing money) by the Fed during his presidency because it kept interest rates down. Had they raised rates during an already lackluster recovery he would have rightly thrown a fit. Now we have a much stronger economy and the Fed is again fretting about inflation and is edging rates up. Trump understands that this negatively impacts the stock market because now other investment vehicles start to have some appeal and that money is usually pulled out of the markets. He also understands that higher interest rates will negatively impact the housing market.
So we've been on a QE binge for almost 10 years and the Fed is trying to come in for a soft landing. History tells us they will fail and if they raise rates too quickly it could trigger a recession. Such is the downside of that dismal of all sciences, economics.
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