Fed Raises Key Interest Rate, Citing Strengthening Economy
WASHINGTON — The Federal Reserve raised its benchmark interest rate Wednesday for just the second time since the financial crisis of 2008, saying the American economy is expanding at a healthy...
WASHINGTON — The Federal Reserve raised its benchmark interest rate Wednesday for just the second time since the financial crisis of 2008, saying the American economy is expanding at a healthy pace and setting itself up as a counterweight to President-elect Donald J. Trump’s push for considerably faster growth.
The Fed cited the steady growth of employment and other economic measures, and signaled that it expects to raise rates more quickly next year to prevent the economy from growing too quickly.
“My colleagues and I are recognizing the considerable progress the economy has made,” Janet L. Yellen, the Fed’s chairwoman, said at a news conference after the announcement. “We expect the economy will continue to perform well.”
The widely expected decision moves the Fed’s benchmark rate to a range of 0.5 percent to 0.75 percent, still very low by historical standards. Low rates support economic growth by encouraging borrowing and risk-taking.
The American economy has expanded by about 2 percent a year over the last six years, and the unemployment rate has fallen to 4.6 percent. The Fed’s assessment that the economy is growing at a healthy pace — not too hot, not too cold — is starkly at odds with Mr. Trump, who has promised 4 percent growth and has described job creation as “terrible” and economic growth as anemic.
Already on Wednesday, one Republican member of the House Financial Services Committee, Representative Roger Williams of Texas, criticized the Fed’s move.
“Today’s decision by the Fed to raise the interest rate is entirely premature and will be burdensome to a nation already struggling to pull itself out of this slow-growth Obama economy,” Mr. Williams said in a statement. “By making rates even higher, the Fed is effectively making our hardships even harder.”
Mr. Williams did not object when the Fed raised rates last December.
In announcing the decision after a two-day meeting of the Fed’s policy-making committee, the central bank gave little indication that Mr. Trump’s election had altered its economic outlook. The Fed said it still expected a slow economic expansion and a steady march toward higher rates. In separate forecasts also published Wednesday, Fed officials predicted three rate increases in 2017.
Rising Rate
The Federal Reserve raised its target rate for only the second time in more than a decade.
Note: Graphic shows the Federal Funds Target Rate previous to the December 2008 rate change; since then it is the upper limit of the Federal Funds Target Range.
By The New York Times | Source: Federal Reserve
For the first time in recent years, however, there is a real possibility of significant changes in fiscal policy. Republicans will control the White House and both chambers of Congress, and Mr. Trump has promised to increase economic growth and job creation through tax cuts and infrastructure spending.
Those measures could spur faster growth after a presidential campaign in which Mr. Trump regularly disparaged the economy’s performance under President Obama. But the Fed reiterated Wednesday that the economy is already expanding at roughly the maximum sustainable pace.
Fed officials also see evidence that the labor market is tightening. Several Fed districts reported labor shortages in the central bank’s most recent compilation of economic reports. In the Philadelphia district, construction workers are hard to find. Atlanta reported a shortage of nurses; Kansas City, truck drivers; Dallas, tech workers.
Faster growth, in the Fed’s judgment, would probably lead to higher inflation. As a result, if Republicans succeed in invigorating growth, the Fed is likely to raise rates more quickly. The greater the stimulus, the faster interest rates are likely to rise.
“Your expectation should depend very little on what you think that the F.O.M.C. is thinking and very much on your view of Trump policies and their macro effects,” said Jon Faust, a professor of economics at Johns Hopkins University and a former adviser to Ms. Yellen, referring to the Federal Open Market Committee. “Don’t focus on the Fed. As James Carville regularly reminded the other Clinton on the campaign trail: It’s the economy, stupid.”
Ms. Yellen emphasized that the Fed was not prejudging the likely course of events. She declined several times to comment on the merits of Mr. Trump’s plans or to predict their consequences for the economy.
“We’re operating under a cloud of uncertainty at the moment,” Ms. Yellen said.
Fed officials predicted that they would raise the Fed’s benchmark rate a little more quickly in the coming years, reaching 2.1 percent by the end of 2018. In September, they had predicted that it would reach 1.9 percent by the end of 2018. The new projections, however, reflect a significantly slower pace of increase than last December, when they expected the rate to reach 3.3 percent by 2018.
The combination of steady growth and faster rate increases indicates that some Fed officials expect the central bank to end up offsetting a modest increase in fiscal stimulus. But Ms. Yellen said most Fed officials were reserving judgment.
“Changes in fiscal policy or other economic policies could affect the economic outlook,” she said. “Of course, it is far too early to know how those changes will unfold.”
What Happens When the Fed Raises Rates, in One Rube Goldberg Machine
Exactly seven years ago, the Federal Reserve cut interest rates to almost zero in order to nurse the ailing economy back to health. Recently it changed direction. This is how it works.
The tensions between monetary and fiscal policy will develop slowly. Legislation takes time to write, and any economic impact would generally be felt in coming years. Political pressures, however, may build more quickly.
Mr. Trump has made clear in the past that he likes low interest rates — and some of his plans, like infrastructure investment, will be much easier to fund if rates remain low.
“The Fed is in a tricky place,” said Michael Feroli, chief United States economist at JPMorgan Chase. “They’re trying not to prejudge how Congress and the administration duke it out, but once they see that, I think they will respond.”
There is also uncertainty about the Fed’s leadership. Ms. Yellen’s term as chairwoman ends in February 2018, and Mr. Trump has said he would prefer a Republican.
Ms. Yellen could remain on the board, a possibility she said Wednesday she had not ruled out. But the Fed, under different leadership, might well choose a different path forward. Some conservative economists, notably John Taylor of Stanford University, argue that the bank should already have raised rates above 1 percent.
The economy, for now, keeps plodding along. Steady job growth has reduced the unemployment rate to a level the Fed considers healthy. A little unemployment is natural as people change jobs and businesses close. Ms. Yellen and other Fed officials have said they see some signs of stronger wage growth. Inflation, too, has picked up a little in recent months, although both wages and inflation continue to rise more slowly than the Fed would like to see.
Ms. Yellen described the rate increase as “a vote of confidence in the economy.”
The decision was made by a unanimous vote of the 10 members of the Federal Open Market Committee, the first time in recent months the Fed has acted by consensus.
Some economists argue that the Fed should wait until inflation strengthens before raising rates, to test whether a stronger economy would persuade some people sidelined during the downturn to start looking for jobs. That would expand the labor force. Unemployment remains particularly high among minorities.
That view, however, has found little support among Fed officials, who worry that interest rates will have to be raised more quickly if they wait too long, increasing the chances of pushing the economy into recession.
“Apparently, Fed officials think the economy is growing too quickly,” said Ady Barkan, the director of Fed Up, a coalition of liberal groups that has pressed the Fed to continue its stimulus campaign. “I doubt you can find many other Americans who share that opinion. And it’s a strange conclusion to draw in the wake of an election that was so heavily impacted by voters’ economic discontent.”
By BINYAMIN APPELBAUM
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REPORT: Milwaukee School Discipline Guidelines Disproportionately Target Black and Latinx Students
REPORT: Milwaukee School Discipline Guidelines Disproportionately Target Black and Latinx Students
Despite costing millions of dollars, punitive student discipline strategies implemented by the Milwaukee Police Department(MPD) over the last decade have failed to improve school safety in the...
Despite costing millions of dollars, punitive student discipline strategies implemented by the Milwaukee Police Department(MPD) over the last decade have failed to improve school safety in the city and have taken a disproportionate toll on students of color, according to a new report from The Center for Popular Democracy and Leaders Igniting Transformation (LIT).
Read the full article here.
For Many Americans, the Great Recession Never Ended. Is the Fed About to Make It Worse?
When the Federal Reserve considers raising interest rates on July 28—and then again every six weeks after—MyAsia Reid, of Philadelphia, will be paying close attention. Despite holding a bachelor’s...
When the Federal Reserve considers raising interest rates on July 28—and then again every six weeks after—MyAsia Reid, of Philadelphia, will be paying close attention. Despite holding a bachelor’s degree in computer science, completing a series of related internships, and presenting original research across the country, Reid could not find a job in her field and, instead, pieces together a nine-hour-per-week tutoring job and a 20-hour-per-week cosmetology gig. The 25-year-old knows that an interest-rate hike will hurt her chances of finding the kinds of jobs for which she has trained, and earning the wage increase she so desperately needs.
A Fed decision to raise interest rates, expected sometime this year, amounts to a vote of confidence in the economy—a declaration that we have achieved the robust recovery we need. “We are close to where we want to be, and we now think that the economy cannot only tolerate but needs higher interest rates,” the chairwoman of the Federal Reserve, Janet Yellen, told Congress during a July 15 policy briefing.
But for many millions of Americans, the recovery has yet to arrive, and for them, a rate hike will be disastrous. It will put the brakes on an economy still trudging toward stability; stall progress on unemployment, especially for African-Americans; and slow wage growth even more for the vast majority of American workers.
The general argument for raising interest rates is that it will prevent wage costs from pushing up inflation. However, there is no data suggesting price instability; nor is there any indication that wages have risen enough to spur such inflation. For the overwhelming majority of American workers, wages have stagnated or even dropped over the past 35 years, even as CEOs have seen their compensation grow 937 percent. During the same period, wage gaps between white workers and workers of color have increased, and black unemployment is at the level of white unemployment at the height of the Great Recession. Meanwhile, the labor-force participation rate is less than 63 percent, the lowest in nearly four decades, suggesting that many Americans have simply given up looking for work.
Yellen has herself often urged the Fed to look at the broadest possible employment picture. Yet, during her recent congressional testimony, shedownplayed the Fed’s ability to address racial disparities, saying that the central bank does not “have the tools to be able to address the structure of unemployment across groups” and that “there isn’t anything directly that the Federal Reserve can do” about it. She cited, rightly, a range of other factors, including disparate educational attainment and skill levels, that contribute to economic and social disparities between racial groups. But she also glossed over the importance of the economic environment in shaping workers’ unequal chances.
One defining metric in shaping workers’ chances is the unemployment rate. A high unemployment rate facilitates racial discrimination. When there are too many qualified job candidates for every job, employers can arbitrarily limit their labor pool based on unnecessary educational requirements, irrelevant credit or background checks, or straightforward bias. A tight labor market, by contrast, makes it much harder for employers to succumb to prejudices and overlook qualified workers simply because of bias. When the number of job seekers matches the number of job vacancies, African-Americans, Latinos, women, gays and lesbians, injured veterans, and formerly incarcerated workers finally get their due in the workforce.
The late 1990s, when unemployment was at about 4 percent, bear out this thesis. During that rosier era, black unemployment was 7.6 percent, and the ratio of black family income to white family income rose substantially.
As the guardian of monetary policy, the Federal Reserve has a number of tools for encouraging a tight labor market, and one of those tools is to keep interest rates low. By keeping rates low, the Fed creates a hospitable environment for job growth by lowering the borrowing costs for consumer and business spending—including hiring new workers. By contrast, raising rates deliberately suppresses spending by consumers and businesses. In the process, it slows job growth, holds down wages, and unnecessarily maintains racial disparities.
With so many workers still struggling, there is no need to cut off this recovery prematurely. Inflation remains below the Fed’s already-low 2 percent target, unemployment and underemployment are too high, and wage growth and labor-force participation are too low. In fact, the Fed should be doing everything within its power to keep nudging the recovery forward for the workers still caught in the slipstream of the Great Recession.
The Federal Reserve should not raise interest rates this week, nor when it meets again six weeks after that. It should not raise rates at all in 2015. Doing so would cause tremendous harm to the aspirations and lives of tens of millions of working families, and would disproportionately hurt African-Americans.
MyAsia Reid knows the difference that a full-employment economy can make. She is ready to participate in the economic recovery. And she will be watching as the Fed decides whether to hold to a strategy of strengthening the recovery or pursue a new strategy that jeopardizes her chances and her community.
Source: The Nation
300+ Arrested in Mass Civil Disobedience Protests at the Nation's Capitol
300+ Arrested in Mass Civil Disobedience Protests at the Nation's Capitol
By Greenpeace
In the final day of a record-setting week of civil disobedience at the Capitol, more than 300 people were arrested Monday as they demanded democracy reforms.
Yesterday'...
By Greenpeace
In the final day of a record-setting week of civil disobedience at the Capitol, more than 300 people were arrested Monday as they demanded democracy reforms.
Yesterday's arrests came on the third and final day of Democracy Awakening. Combined with arrests made during the recent Democracy Spring, the protests constituted what organizers believe is a record for civil disobedience over democracy issues during this century.
The message: On voting rights, money in politics and the recent vacancy on U.S. Supreme Court, Congress is failing to do its job and ignoring the will of the people. Democracy Awakening isn't the end of something, but the beginning of a new phase in the movement for democracy, organizers said.
Those who planned to risk arrest included NAACP president and CEO Cornell William Brooks; the Rev. William Barber II, pastor and Moral Monday architect; radio commentator Jim Hightower; Ben Cohen and Jerry Greenfield, co-founders of Ben and Jerry's; Greenpeace Executive Director Annie Leonard; and Sierra Club President Aaron Mair.
Here's what they had to say about why they risked arrest at our nation's Capitol:
"I'm willing to risk arrest, arm in arm with partners from the civil rights and the labor movements, in order to help fix our democracy," Leonard said. "We will never get the kind of political progress needed to challenge climate change and systemic racism if corporate cash continues to mean more to politicians than the voices of the people."
"Democracy is supposed to be for all of us, but right now we have an out-of-balance system favoring the interests of big money," Cohen said. "This can't go on. I'm prepared to risk arrest to send a message that democracy should truly be of, by, and for the people."
"At a certain point, you have to say enough is enough," Greenfield said. "I have decided to risk arrest because we can't continue to have a political system where ordinary people are shut out of the process. It's not what our founders envisioned, and it's not what democracy is supposed to be about."
"We cannot sit by and watch obstructionists push an agenda of inequity, injustice and inaction -- and I'm willing to risk being arrested in order to make my voice heard in in the fight to ensure that every voice can be heard in our democracy," Mair said. "All too often, the costs of these assaults on our democracy fall on low-income communities and communities of color that already face disproportionate effects from pollution and the climate crisis. A zip code should never dictate the destiny of any American citizen."
Thousands of activists from around the country streamed into the nation's capital April 16-18 for Democracy Awakening, which featured teach-ins, a rally, a march and lobbying as well as the civil disobedience. The aim: to fight back against business as usual in Washington, DC.
More than 300 organizations endorsed Democracy Awakening. Democracy Awakening is part of a broad movement aimed at advancing democracy reforms. The mobilization began April 2, with Democracy Spring, an event that featured a march from Philadelphia to Washington D.C., followed by six days of sit-ins at the Capitol.
Others who planned to risk arrest included top leaders of the AFL-CIO, All Souls Unitarian Church, the American Federation of Government Employees, the American Postal Workers Union, Campaign for America's Future, Democracy Initiative, Center for Popular Democracy, Communications Workers of America, Ella Baker Center for Human Rights, Every Voice, Food & Water Watch, Franciscan Action Network, Free Speech for People, Friends of the Earth, Greenpeace, the International Brotherhood of Teamsters, the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, Jobs With Justice, the Metropolitan African Methodist Episcopal Church; the NAACP, Oil Change International, Public Citizen, Sierra Club, the United Church of Christ, the United Food and Commercial Workers International Union, We Are Casa, the Yes Men and 350.org.
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Activists swarm Senate offices to protest Republican health care bill; 155 arrested
Activists swarm Senate offices to protest Republican health care bill; 155 arrested
Crowds of activists swarmed Senate offices Wednesday to protest the Republican Party's proposed plan to repeal Obamacare.
Lining hallways across Washington, participants staged multiple...
Crowds of activists swarmed Senate offices Wednesday to protest the Republican Party's proposed plan to repeal Obamacare.
Lining hallways across Washington, participants staged multiple demonstrations looking to voice their dissatisfaction with Majority Leader Mitch McConnell's intent to dismantle Obamacare without a replacement following the implosion of the Republican Party's latest Senate health care bill.
Read the full article here.
The Real Reason Workers Can’t Get A Raise
Congress could revise the Federal Reserve’s mandate to emphasize running the economy at full employment with rising wages and moderate inflation. Progressives should follow the lead of Fed Up, the...
Congress could revise the Federal Reserve’s mandate to emphasize running the economy at full employment with rising wages and moderate inflation. Progressives should follow the lead of Fed Up, the project of the Center for Popular Democracy, and challenge appointments to Federal Reserve and its member banks, demanding greater representation of workers, consumers and poverty advocates.
Read the full article here.
National educators tour Kentucky Family Resource and Youth Service Centers
National educators tour Kentucky Family Resource and Youth Service Centers
National education leaders are taking notice of the impact the Kentucky Family Resource and Youth Service Centers (FRYSC) are making across the commonwealth.
An impressive list of these...
National education leaders are taking notice of the impact the Kentucky Family Resource and Youth Service Centers (FRYSC) are making across the commonwealth.
An impressive list of these leaders visited Kentucky in late September to see first-hand the array of services the FRYSC Program provides by serving as the vital link between classrooms, families, and communities.
Officials from the National Education Association, Center for Popular Democracy, and the Communities in schools organization initiated the trip.
Participants represented a multi- disciplinary group of educational activists as well as teachers, principles and administrators from public school systems across the country.
Doug Jones, manager of FRYSC Region 7, helped organize the trip by choosing sites for tours in both rural and urban areas.
Source: KFVS12.com
These Wall Street Companies Are Ready To Call In On Trump’s Border Wall
These Wall Street Companies Are Ready To Call In On Trump’s Border Wall
Much of the discussion on President Donald Trump’s border wall has focused on its cost and impracticality, as well as the anti-immigrant and racist rhetoric it embodies. Little attention, however...
Much of the discussion on President Donald Trump’s border wall has focused on its cost and impracticality, as well as the anti-immigrant and racist rhetoric it embodies. Little attention, however, has been paid to who specifically might profit from building the structure.
Read the full article here.
Fed’s Kashkari to Spend Day in Life of Struggling Black Family
Neel Kashkari tried living on streets for a week during his failed run for California governor in 2014. Now, the president of the Federal Reserve Bank of Minneapolis will spend a day in the life...
Neel Kashkari tried living on streets for a week during his failed run for California governor in 2014. Now, the president of the Federal Reserve Bank of Minneapolis will spend a day in the life of a black family barely making ends meet.
“Walking a day in somebody else’s shoes is actually -- it makes the anecdotes that much more real,” Kashkari, 43, told reporters Wednesday in Minneapolis after a meeting with the local community to discuss race and economic inequality. “It influences how I think about the problems we face.”
Kashkari, a former Goldman Sachs Group Inc. executive who went on to oversee the U.S. government’s $700 billion financial rescue program, took the helm of the Minneapolis Fed in January.
National poverty levels among blacks stand at 26 percent, more than double those for whites. Fed Chair Janet Yellen has discussed inequality and the fact that minorities have higher unemployment than whites in speeches and testimony to Congress.
Outrage has mounted in the U.S. over a recent spate of fatal shootings of black men by police, some of which were filmed and broadcast over social media, worsening racial tensions in many communities.
On Wednesday, Kashkari, whose parents emigrated to the U.S. from India, heard Rosheeda Credit describe how she and her boyfriend worked three jobs between them to support their family. She then invited him to find out himself what it was like by spending the day with her.
Kashkari said he’d be “happy to do it.”
The Fed has also been under fire from Democrats, including presidential nominee Hillary Clinton, for a lack of diversity on the boards of directors on the 12 regional Fed banks. Kashkari said the central bank had a lot of work to do to improve diversity and was committed to making that happen.
By ALISTER BULL & JEANNA SMIALEK
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Report: Pa. Charter Schools Lost 30M to Fraud, Mismanagement
Daily News - October 1, 2014, by Regina Medina -THE STATE'S charter schools are out $30 million due to chicanery and waste since the 1997 charter-school law was enacted, according to a report...
Daily News - October 1, 2014, by Regina Medina -THE STATE'S charter schools are out $30 million due to chicanery and waste since the 1997 charter-school law was enacted, according to a report released yesterday by three grass-roots education groups.
The report, "Fraud and Financial Mismanagement in Pennsylvania's Charter Schools," was authored by the Center for Popular Democracy, Integrity in Education and Action United. It calls for, among many recommendations, a moratorium on new charter schools, changes to the oversight structure and legal protections "to encourage whistle-blowers to report instances of fraud."
The state's oversight of charter schools is "not effectively detecting or preventing fraud," the report says.
The charter-school law mandates general auditing techniques, which the report claims may find inaccuracies but won't detect abuse. The report urges that charter schools follow practices used by federal agencies and conduct targeted audits that look into high-risk areas.
The report adds that whistle-blowers within the charter organizations and the media have exposed the majority of fraud cases and suggested that oversight agencies increase staffing to adequate levels.
In Philadelphia, the district Charter School Office oversees the city's 86 charters. The office has five staffers and no director.
The report cites specific cases of fraud around the state including the following from Philadelphia:
* Two officials with the Philadelphia Academy Charter School, Kevin O'Shea and Rosemary DiLacqua, were convicted in 2009 of defrauding the school of more than $900,000. They submitted fraudulent invoices for personal expenses.
* Ina Walker, former CEO, and Hugh Clark, founder, of the New Media Technology Charter School, were sentenced to prison for stealing $522,000 in taxpayer funds, which were used to fund a restaurant and a private school.
* Dorothy June Brown, who founded a number of charter schools including Laboratory Charter and Planet Abacus, is to be retried this year for allegedly defrauding $6.5 million from the schools and then attempting to cover it up.
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