- On Wednesday, the Federal Reserve did exactly what they did last year
- They waited until the last possible meeting to nudge the Federal Funds rate by 1/4 of 1%
- So now, after 2 years of tightening, the lower bound of the Fed’s range has gone from zero to 1/2 of 1%
- Now Janet Yellen said the Fed made this decision to lift rates because of its confidence in the U.S economy
- That is complete nonsense
- If the Fed were confident in the U.S economy, rates would be much higher than a half of a percent
- The Fed would have raised rates a long time ago and by much more than this
- In fact, they could have lifted rates by more than 25 basis points on Wednesday
- Yet, they had so little confidence in the economy that this is what they did
- In fact, I believe that the only reason the Fed raised rates this December
- Is the same reason they did so last December: they did it despite having no confidence in the economy
- But they didn’t want to send a message that they were that worried, so they raised interest rates by the smallest possible amount
- And they also did it to try to preserve their credibility when it comes to talking about future interest rates
- Think about one half of one percent
- When Alan Greenspan slashed interest rates in the aftermath of the September 11 disaster and the bursting of the dot com bubble
- When the stock market was plunging and the economy was in recession, he was so worried about the economy that he lowered rates down to 1%
- Now Yellen is so confident in the economy, the highest she’s willing to raise them is 1/2 of 1%?
- This is half of where they were lowered in panic by Greenspan?
- So the fact that rates are only 1/2%, what does that tell you about the true confidence that Janet Yellen and the rest of the Federal Reserve have in the U.S. Economy?
Fed Fakes Confidence With Another Dec. Quarter Point Rate Hike
Peter Schiff is an economist, financial broker/dealer, author, frequent guest on national news, and host of the Peter Schiff Show Podcast.
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