The Bureau of Economic Analysis released its economic reports for the month of August on Friday. They showed that the economy continues to be sluggish under President Obama. Despite the bad data experts still foresee future Fed interest increases.
In analyzing this data Reuters wrote “Fed Chair Janet Yellen said last week she expected the U.S central bank would raise rates later this year to keep the economy from eventually overheating.”
Since when is sub 2% GDP growth close to an overheating economy? The Fed lowered rates during the Clinton economy when there were higher growth rates. The Fed can’t say that inflation is an issue either since it has been below its 2% target for years.
This Fed Posturing could serve multiple purposes, First it could give the Democrats political leverage against a Trump Presidency by having a rate induced recession to lay at his feet. Conversely since President Obama’s policies have failed to induce enough growth a Fed recession could give a President Clinton a reason to massively expand upon President Obama’s policies.
Looking on the brighter side, perhaps this threatened Fed action is a message to President Obama and his potential successors that the massive deficits are a problem. Since the government hasn’t adresses it the Fed feels it must make it harder for it to incur more debt.
Whatever the reason for the Feds potential actions one thing is for certain. It will not be good for the U.S economy.