Imagine being stuck in a blizzard. You look out your window and can see the snow piling up outside, yet the meteorologist on your TV is forecasting continuing sunshine and near tropical weather.
That level of disconnect is similar to that shown by some members of the Federal Reserve Board, who are preparing for liftoff, even as the economy implodes like a SpaceX rocket. The difference, though, is that the SpaceX failure was an unmanned flight; when the Fed acts, we’re all on board, like it or not.
We recently reported that a couple of members of the Federal Open Market Committee had spoken publicly in favor of a rate hike. But this past week, they were no longer the outliers, as even Fed Chair Janet Yellen joined in during a speech before the Economic Club of Washington.
USA Today reported, “Federal Reserve Chair Janet Yellen signaled Wednesday that the Fed is all but certain to raise interest rates this month for the first time in nearly a decade, saying that gains in the economy and labor market have met the central bank’s goals.”
If you read on, though, that’s not quite what she said. Given that inflation is nowhere near the Fed’s 2% goal, she couldn’t say that the central bank’s goals have been met.