Federal Reserve keeps key interest rate at zero, citing global turmoil
The Federal Reserve on Thursday voted to maintain its unprecedented support for the U.S. recovery, leaving a key...
The Federal Reserve on Thursday voted to maintain its unprecedented support for the U.S. recovery, leaving a key interest rate unchanged amid gathering clouds over the global economy.
In an official statement, the nation’s central bank said the job market is recovering and hiring is “solid.” But it expressed concern that inflation remains too low and exports have weakened. Meanwhile, the risk is building that turmoil overseas will drag down growth in America.
"Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term," the central bank's official statement read.
The decision to keep the Fed’s benchmark interest rate at zero amounts to a recognition that the robust recovery central bank officials had hoped for when they launched into an uncharted era of easy money during the throes of the 2008 financial crisis has yet to materialize. The Fed has repeatedly pushed back the goal line as the economy failed to deliver. Seven years after the central bank cut its target rate to zero, Fed officials believe the recovery is not yet ready to stand on its own.
At the press conference that followed the rate announcement Thursday afternoon, Fed Chair Janet Yellen said that a rate hike was still likely by the end of the year. But she reiterated that though “domestic developments have been strong, we want to see continued improvement in the labor market," and the central bank would like "to bolster our confidence that inflation will move toward" the Fed’s 2 percent target before a rate hike.
“We have very large drags from energy prices and import prices," Yellen said, adding that the central bank views those as transitory. As the labor market heals, "we will see further upward pressure on inflation," she said. “We expect to achieve our 2 percent goal over the medium term.”
Markets grew volatile immediately after news of the rate hold, going flat by the end of Yellen's press conference. The Dow Jones Industrial average closed down 0.4 percent and the Standard & Poor’s index closed down about 0.3 percent on Thursday.
Documents released by the Fed show most of the Fed's top brass now anticipate increasing rates only once this year, instead of twice. A growing minority think the central bank should not raise its benchmark rate this year at all, and one suggested it should stimulate the economy even more by taking the rate negative.
Three officials are advocating a 2016 liftoff, while one person pinned 2017 as the date -- longer than anyone has suggested so far.
“Even though the summer stresses in financial markets have abated, the impact of the intense market volatility on domestic economic activity is yet to fully play out,” Millan Mulraine, deputy chief U.S. macro strategist at TD Securities, wrote in a research note.
The Fed lowers its target rate when it wants to stimulate the economy by encouraging businesses and consumers to spend. It hikes when the economy begins to grow too quickly and inflation picks up, making saving money more attractive.
Timing, however, is crucial. If the Fed moves too soon, it risks undercutting the recovery’s momentum. Waiting too long could stock dangerous financial bubbles.
Yellen made reference to that risk at the press conference Thursday when asked whether the Fed should be moving sooner rather than later to raise the rates. "I don't think it's good policy to then have to slam on the brakes," she said.
The Fed modestly upgraded Thursday its expectation for economic growth this year from 1.9 percent to 2.1 percent, but the forecast is still lower than the robust expansion enjoyed a decade ago. The jobless rate has already fallen below the central bank's June estimate of 5.3 percent. The Fed adjusted its forecast to 5 percent. It also nudged up its estimate of core inflation from 1.3 percent to 1.4 percent.
In May, Yellen said speech that she expected the economy would be strong enough to raise the target rate by the end of the year. Other top Fed officials had signaled the long-awaited move could come during its meeting this month.
But that was before the jaw-dropping swings in financial markets over the past few weeks, including a 1,000-point plunge in the Dow Jones industrial average. Evidence is mounting that China’s breakneck economic growth is fizzling out faster than previously thought.
In the meantime, the strong U.S. dollar and low oil prices are weighing on inflation, which has run below the Fed’s target of 2 percent for years. The World Bank, the International Monetary Fund, Nobel-laureate Joseph Stiglitz and former Treasury Secretary Lawrence Summers have all called on the central bank to hold off on a rate hike, at least for now.
“Now is the time for the Fed to do what is often hardest for policymakers,” Summers wrote in The Washington Post recently. “Stand still.”
The calls for delay are also coming from a populist campaign known as Fed Up, which protested outside of the central bank’s buildings Thursday. Several lawmakers joined the demonstration, including Michigan Rep. John Conyers, who is sponsoring a bill that would require the Fed to target a 4 percent unemployment rate.
Not everyone agrees the Fed should wait, however. Richmond Fed President Jeffrey Lacker dissented from the central bank’s vote on Thursday. In aspeech earlier this month, he pointed to strong consumer spending, the sharp decline in unemployment and a pickup in inflation measured since the beginning of the year as reasons a rate hike is warranted.
“I am not arguing that the economy is perfect, but nor is it on the ropes, requiring zero interest rates to get it back into the ring,” he said. “It’s time to align our monetary policy with the significant progress we have made.”
In its official statement, the Fed attempted to assure investors and the public that after the first rate hike, it expects to make subsequent hikes only gradually. Though most officials predicted the Fed would raise its target rate several times next year, they also forecast it would remain below its historic norm of about 4 percent for several years. Fed documents released Thursday show the long-run median estimate at just 3.5 percent.
Each hike will also likely be small, analysts expect just one quarter of one percent. That would allow the central bank to assess how an economy grown accustomed to easy money operates under a new regime.
“One should never discount the importance of an interest rate change by a central bank merely because it looks small,” said Scott Sumner, an economist at the Mercatus Center at George Mason University. “Some pretty big avalanches have started from a small pebble being dislodged.”
Source: Washington Post
Why the People’s Climate March matters to people of color like me
Why the People’s Climate March matters to people of color like me
Ever since taking power, the Trump administration has made clear it intends to wage war on the environment. It’s given...
Ever since taking power, the Trump administration has made clear it intends to wage war on the environment. It’s given the green light to both the Dakota Access and Keystone pipelines and geared up to wipe away long-standing protections that keep our air and water safe. Its mission is clear: Eliminate any obstacle that stands in the way of fossil fuel companies.
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Prosecutors and Race Bias: Why the DOJ Needs to Act
Prosecutors and Race Bias: Why the DOJ Needs to Act
Prosecutors are supposed to hold people accountable when they hurt other people—that’s part of the job. Yet for years...
Prosecutors are supposed to hold people accountable when they hurt other people—that’s part of the job. Yet for years prosecutors across the country have opted out of that responsibility when the perpetrator is a police officer.
Last year, police killed African Americans at a rate more than twice that of white people, according to the Guardian’s database, and African-American men between the ages of 15 and 34 at a rate five times that of white men in that age range. Our morgues were busy due to killings by police in 2015 -- 1,145 deaths among all races, according to the database.But our district attorneys’ offices were not nearly as busy: in 2015, they initiated just 18 prosecutions of police officers who killed civilians.
If local prosecutors won’t act, the federal government should find out why.
Chicago prosecutor Anita Alvarez waited almost a year before indicting the officer who killed Laquan McDonald, a young African-American man. She faced relentless pressure from organizers and communities in Chicago and brought charges only after a judge ordered the city to release the videotape of the killing that directly contradicted the officers’ versions of the shooting.
And the Chicago officer who killed Reika Boyd was acquitted after a botched prosecution by one of Alvarez’s attorneys who kept his job.
In Cleveland, Tamir Rice, a 12-year-old African-American youth, was shot and killed within two seconds of officers arriving on the scene. Prosecutor Tim McGinty oversaw a grand jury “investigation” that involved leaked “expert” reports justifying the shooting, presentation of evidence that Tamir kept a toy gun longer than he should have, and accusations that Tamir’s family protested the killing of their son because of money.
In the Bronx, New York City paid $3.9 million to the family of Ramarley Graham who was shot and killed by police while in his own home, but criminal charges against the officer were dismissed, and the officer is still on the job — with a raise.
The behavior of these prosecutors led many to believe that race bias played a role in their actions. Alvarez and McGinty were voted out of office, reflecting the community reaction against two elected prosecutors; but this does not resolve issues of potential race bias by prosecutors remaining in those offices or in offices of other local prosecutors around the country.
Judges, prosecutors, and former presidential advisors have acknowledged that race bias, deliberate or unintentional, has played a role in the incarceration of African Americans in unfairly disproportionate numbers. We know prosecutors can be drivers of racialized mass incarceration because they hold so much power in our current system of plea bargain justice.
The reality that African Americans are incarcerated at nearly six times the rate of white people is at least in part a result of the discretionary decisions of prosecutors.
Under the circumstances, shouldn’t we ask if any kind of race bias led local prosecutors to defend police who kill instead of objectively investigating them? Given the other evidence of race bias in the system, doesn’t the miniscule number of prosecutions in killings that disproportionately affect the African-American community suggests a disturbing answer?
Until now, prosecutors have been exempt from virtually any scrutiny. It is time for that exemption to expire, and the Department of Justice has the authority and responsibility to act. The Safe Streets Act of 1968 and the Violent Crime Control Act of 1994 authorize the attorney general to conduct investigations and file civil litigation to eliminate “a pattern or practice of discrimination on the ground of race, color, religion, national origin, or sex, in connection with any law enforcement agency that receives financial assistance from DOJ’s Office of Justice Programs and the Office of Community Oriented Policing Services.”
Law enforcement is defined as “all activities pertaining to crime prevention or reduction and enforcement of the criminal law.” Prosecutors, like police departments, receive millions of dollars in federal funding through Justice Assistance Grants and should be subject to the same scrutiny as the police.
Looking for the influence of race bias is not an accusation of racism. The Manhattan District Attorney’s Office investigated the possible role of race bias in its own work without any intervention by the Justice Department. District Attorney Cyrus Vance was not accusing his staff of racism. He was willing to look for any impact race bias might have on carrying out justice. The Vera Institute examined the office’s work, from charging decisions to plea offers, and discovered evidence of racial bias that could not be explained by other factors.
Does this show that Manhattan DAs are racist? No, it points to an equally serious problem — racial bias exists systemically in ways prosecutors have not or will not recognize.
The impact of unconscious bias can be reduced and even eliminated by training to recognize it and using best practices to eliminate its influence. But if you don’t look for it, you won’t find it. And we need to remember that for those injured, killed, or incarcerated—and for their families, who are forced to bear the financial and emotional costs of incarceration—the difference between conscious and unconscious bias means nothing.
The killing of Michael Brown brought no indictment, but investigating the Ferguson police revealed some of the ugliest racist attitudes in America, leading to a Department of Justice lawsuit against the department.
How did it get that bad in Ferguson? For one thing, police knew the DAs wouldn’t hold them accountable for their behavior. We need prosecutors to do their jobs when police officers are the defendants. If they are reluctant to do it, a visit from the feds may help change their thinking.
The Department of Justice must step in and use its authority and power to ensure justice.
By Marbre Stahly-Butts and Jeffery Robinson
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Cities Are Saying ‘No’ to ICE by Canceling Their Contracts With the Agency
Cities Are Saying ‘No’ to ICE by Canceling Their Contracts With the Agency
The stunning victory of 28-year-old Democratic Socialist Alexandria Ocasio-Cortez in the New York primary on June 26...
The stunning victory of 28-year-old Democratic Socialist Alexandria Ocasio-Cortez in the New York primary on June 26 pushed the call to “abolish ICE” suddenly and powerfully onto the national stage. (ICE, of course, is the acronym for the Immigration and Customs Enforcement agency.) But even before big-name politicians like Kirsten Gillibrand and Bill de Blasio began taking up the call, a growing anti-ICE rebellion had begun reverberating across city and county legislatures in response to the Trump administration’s brutalizing “zero-tolerance” immigration policy.
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Nina Tassler & Denise DiNovi Launch Indie Studio PatMa Focused On Diverse Voices
Nina Tassler & Denise DiNovi Launch Indie Studio PatMa Focused On Diverse Voices
PatMa Prods. has forged strategic partnerships with several organizations with shared common values, including the...
PatMa Prods. has forged strategic partnerships with several organizations with shared common values, including the Geena Davis Institute on Gender in Media, Center for Popular Democracy, and Planned Parenthood, among others.
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Activists ‘Fed Up’ With Rate Rise Talk Offer Plosser a City Tour
Bloomberg News - November 15, 2014, by Jeff Kearns & Christopher Condon -Labor and community organizers meeting...
Bloomberg News - November 15, 2014, by Jeff Kearns & Christopher Condon -Labor and community organizers meeting with Federal Reserve Chair Janet Yellen challenged officials who are ready to raise interest rates to first come visit the poorest neighborhoods with them before saying that the economy has recovered.
Kati Sipp, one of about two dozen activists meeting Yellen, said at a press conference yesterday in front of the central bank in Washington that she would show Philadelphia Fed President Charles Plosser “what life is like in this economy” for his city’s unemployed.
“Clearly Charles Plosser hasn’t been coming out the way that I work,” said Sipp, director of Pennsylvania Working Families. “I work on 60th Street in West Philadelphia in a storefront office, and every single day someone or a couple of people come in to my office because they are looking for work.”
A spokeswoman for the Philadelphia Fed declined to comment.
Members of the group met with Yellen and Fed governors Stanley Fischer, Jerome Powell and Lael Brainard. The coalition of 20 community groups, labor unions and religious leaders from around the U.S. wants the Fed to hear the concerns of ordinary Americans as it prepares to raise rates. It’s part of wider public pressure, including from lawmakers of both parties, who want more accountability and transparency from the central bank.
The Fed has been criticized by Democratic and Republican groups over its rescue of big Wall Street banks in the 2008-2009 financial crisis, and over subsequent steps to support the economy through zero interest rates and massive bond purchases.
Yellen Meeting
The group meeting with Yellen and her colleagues yesterday included individuals struggling to find work despite the improving economic picture in the U.S., Ady Barkan, senior staff attorney at the Brooklyn-based Center for Popular Democracy, one of the organizers of the meeting, said in an interview.
“They all listened very intently and asked questions,” Barkan said of Yellen and the three governors. “They were very interested in hearing about the personal stories of the folks we brought.”
Those included Reginald Rounds, a resident of Ferguson, Missouri, near St. Louis, where protests erupted after an unarmed black teenager was shot and killed by police in August. The predominantly black town became a symbol of racial inequality and militarized policing as armored trucks and tear-gas canisters rolled through the suburban community after the shooting.
‘Sky-High’
Barkan said Rounds told the Fed officials that “sky-high unemployment” in the St. Louis area had contributed to “desperation” in the town.
Another speaker was Shemethia Butler, an unemployed woman from Washington. She recounted for Yellen how she was laid off from a job that offered no paid sick days after becoming ill and missing time at work, Barkan said.
Barkan said he had agreed with Fed officials not to recount how Yellen and the governors responded.
Eric Kollig, a Fed spokesman, declined to comment on the meeting.
The jobless rate has fallen to 5.8 percent from a 26-year high of 10 percent in October 2009. Interest rates have been held near zero since December 2008, and most Fed officials project that they will raise borrowing costs sometime in 2015.
Still, millions of Americans can find only part-time work, and average hourly wages have risen at about a 2 percent pace for the last five years, barely outpacing inflation.
Big Banks
“The economy is not working for the vast majority of people,” Barkan told reporters before the meeting in front of the central bank headquarters facing the National Mall. “It’s too important of an institution to be controlled and dominated by big banks and corporations rather than the public.”
In addition to low rates to help the unemployed, the groups are pushing for a more open and transparent search process for regional bank presidents that includes more community input. Barkan said the group asked Yellen for support in arranging meetings with each regional Fed president.
While formal changes to the process of selecting regional Fed leaders would require legislation, Barkan said the Fed board of governors held significant informal influence over the process.
“I’m sure they could change the process if they wanted to,” he said.
Plosser, Fisher
Plosser and Richard Fisher of Dallas both plan to retire next year and the “Fed Up” coalition wants more public input in naming their successors. Both banks have said they have hired executive search firms to find candidates.
Regional bank chiefs are picked by their respective boards, which are typically composed mostly of banking and business executives. Philadelphia’s nine-member board includes Comcast Corp. Chief Financial Officer Michael Angelakis.
Both presidents have cast dissenting votes this year against the Fed’s policy, and have been among officials favoring raising rates sooner to prevent inflation and financial-instability pressures from building.
“It’s important that real people are also representing the public and Federal Reserve policy making,” Sipp said. “We want publication of the names that are under consideration so that we know who they are, that it’s not just a puff of white smoke and suddenly we have a new” president.
Search Firms
The Philadelphia Fed has hired executive search firm Korn/Ferry International and said yesterday that the Los Angeles-based company has set up an e-mail address -- PhiladelphiaFedPresident@KornFerry.com -- to receive inquiries.
The Dallas Fed announced two days ago that it hired Heidrick & Struggles International Inc. to seek a replacement for Fisher.
Economist Josh Bivens, research and policy director at the Economic Policy Institute in Washington, told reporters yesterday that the Fed’s willingness to arrange the meeting was “incredibly encouraging” because the central bank “is one of the most important institutions in the world but few Americans know it.”
While the unemployment rate has declined to a six-year low, there remains “too large a gap between today and a healthy economy,” he said, adding that stakes are highest for disadvantaged groups, including African-Americans. Their unemployment rate tends to be twice as high as the broader U.S. level both “in good times and in bad,” Bivens said.
The rate was 10.9 percent in October, and rose to a 26-year high of 16.9 percent in March 2010, Labor Department data show. The rate for whites was 4.8 percent last month.
Wider Inequality
Yellen, a labor market economist for most of her three-decade career in government and academia, has shown concern for people who aren’t fully benefiting from a stronger economy. Last month, in a speech in Boston, she questioned whether widening inequality is “compatible with values rooted in our nation’s history.”
Since becoming chair in February, Yellen has focused attention on those who have been left behind after five years of economic expansion. In March, she told a community development conference in Chicago the Fed hadn’t done enough to combat unemployment and cited local residents who have struggled with joblessness.
In August, the Center for Popular Democracy brought low-wage workers to the Fed’s annual monetary policy symposium in Jackson Hole, Wyoming, where they spoke briefly with Yellen on the sidelines of the event and met with Kansas City Fed President Esther George, who also wants to raise rates sooner.
The activists arrived at the Fed wearing the same shirts that they wore when they gathered in the lobby of the Jackson Lake Lodge during the symposium: bright green T-shirts emblazoned with the question “What Recovery?”
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Durham County judge, attorneys interested in filling seat held by Paul Luebke Read more here: http://www.newsobserver.com/news/local/community/durham-news/article118570918.html#storylink=cpy
Durham County judge, attorneys interested in filling seat held by Paul Luebke Read more here: http://www.newsobserver.com/news/local/community/durham-news/article118570918.html#storylink=cpy
Phil Lehman was officially sworn in to fill his longtime friend Paul Luebke’ seat last month, but his term as a state...
Phil Lehman was officially sworn in to fill his longtime friend Paul Luebke’ seat last month, but his term as a state representative will only last a month or so.
Lehman, a a longtime consumer advocate in the state attorney general’s office who retired three years ago, was appointed to the seat the night before the Nov. 8 election and plans to step down in January.
“I don’t think there was enough time to do all the vetting process and consulting with the political groups to find somebody younger than I was to be in this for the long haul,” said Lehman, 70.
Luebke, 70, a Democrat who represented Durham for 25 years in the state House, died in late October. He had been diagnosed with lymphoma in 2015 and received treatment, but suffered a sudden return of the cancer.
Luebke, who was running for re-election to a 14th term, remained on the ballot for the general election
According to elected officials, a subset of the Durham County Democratic Party Executive Committee that included precinct chairs and vice chairs and elected officials in House District 30, initially planned to fill the seat after the election. That changed after concerns were raised about procedure and possible future complications.
“The recommendation was made by the state Democratic Party that we didn’t want to go through the election cycle without having somebody appointed to serve in his place on the ballot,” said Sen. Floyd McKissick, a Durham Democrat who said he preferred taking that route from the beginning.
The subset of the Durham committee met Nov. 7 and voted to appoint Lehman to the seat as a place holder to fill the existing term and the start of the new term.
At least four candidates want the seat when Lehman steps down.
▪ Danielle Adams, 32, is an eight-year member of the Durham County Soil & Water Conservation District Board of Supervisors who was recently re-elected. She is the southern coordinator for Local Progress, an arm of the national nonprofit Center for Popular Democracy. It encourages progressive policy making at the local level.
Adams wants to bring a strong, pragmatic, progressive voice that represents young people, women and people of color.
“I don’t think my voice has been reflected, and I think part of my desire comes in wanting to see that change and being that change not only for myself but for the many others like me,” she said.
▪ Shelia Huggins, 49, is a private attorney who worked for the city for eight years, most recently as a senior administration manager with the Department of Economic and Workforce Development. Huggins said she has focused on supporting entrepreneurship by serving on the N.C. Central University School of Business Board of Visitors and Alamance Community College Small Business Center Board of Advisers.
Huggins wants to improve the economic vitality of the state.
“I would really like to see us build a business climate that is supportive of people who are trying to build businesses and people who already have business in the state of North Carolina,” she said.
▪ Marcia Morey, 61, Durham County’s chief district judge, has served on the bench for nearly 18 years. She was a driving force behind the county’s misdemeanor diversion program, which was the first in the state after it was established in 2014 to give 16- and 17-year-olds charged with certain misdemeanors a second chance. The program was later expanded to18- to 21-year-olds and has been a model for other counties across the state
Morey said she is up for a new challenge to help make better policies and laws.
“I think after 18 years in the courts, you see many issues that would come before the General Assembly,” Morey said. “It has given me a lot of awareness and experience to kind of know how to look at laws, and how they are interpreted, and the impact they have on people’s lives.”
▪ Sherri Zann Rosenthal, 59, is a senior assistant city of Durham attorney. She worked as a contract attorney for the city for six years before becoming an assistant city attorney in 1995. Rosenthal served as president of the Durham-Orange Women Attorneys and created a committee on child sexual trafficking in Durham. The committee’s advocacy lead to the creation of the Durham County Task Force Against Child Sexual Exploitation, which is providing prevention training in schools and promoting the gathering of information of cases that come through the Durham County Department of Social Services.
Rosenthal said public policy has always been her core interest.
“I think that at the state level we have really gotten away from fact-based public policy, and we have gotten very polarized. It is very important that we join together so that we solve real problem,” she said.
By Virginia Bridges
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Joseph Stiglitz explains why the Fed shouldn't raise interest rates
The answer should clearly be "no." The preponderance of economic data indicates that the predictable costs of premature...
The answer should clearly be "no." The preponderance of economic data indicates that the predictable costs of premature tightening — slower job and wage growth — far outweigh the risk of accelerating inflation.
Six years into a lackluster U.S. expansion, price growth for personal consumption expenditures — excluding food and energy — has averaged less than 1.5% annually in the recovery, well below the Fed's unofficial 2% inflation target. It slowed to 1.3% so far in 2015.
Global economic forces are poised to drive inflation still lower. Last week, oil prices fell to $42, a low not seen since February 2009. Europe's growth remains anemic and is likely to remain so: The IMF forecast for 2015 is just 1.5%. And while it is difficult to piece together a precise picture of what is happening in China, most experts see growth slowing markedly, with effects in other emerging markets.
With a weaker euro and yuan, our exports will decrease and our imports increase. Together, this will put pressure on domestic businesses and the job market, which is hardly robust.
Despite a headline unemployment rate of 5.3%, the true labor market situation faced by working families in the United States remains dire. Millions remain trapped in disguised unemployment and part-time employment. As of July, the nation faced a jobs gap of 3.3 million — the number needed to reach pre-recession employment levels while also absorbing the people who entered the potential labor force. The true unemployment rate, including those working part time involuntarily and marginally attached, is more than 10.4%.
Poor labor market conditions are also reflected in wages and incomes. So far this year, wages for production non-supervisory workers, which tracks closely to the median wage, fell by 0.5%. Median household income — a better indicator of how well the economy is doing as seen by the typical American than GDP — at last measure was lower than it was a quarter-century ago.
It is hard to see why the Fed would choose slower job and wage growth for most Americans just to protect against the theoretical risk of moderately higher inflation. But, then again, it's often hard to understand the Fed's policy choices, which tend to contribute to widening inequality in the United States.
Too often, after the end of one recession, the Fed, fearing inflation, has used monetary policy to dampen the economic expansion. Its maneuvers keep inflation low but unemployment higher than it otherwise would be, negatively affecting all workers, not just those out of a job. Workers in jobs face greater stresses, downward pressure on wages and diminished opportunities for upward career mobility. The costs of higher unemployment are borne disproportionately by people in lower-income jobs, who also tend to be disproportionately people of color and women.
After the 2008 crisis, the Fed tried to stimulate the economy by buying bank debt, mortgage-backed securities and Treasury assets directly from the market — so-called quantitative easing — which disproportionately benefited the rich. Data on wealth ownership show clearly that the portfolios of the rich are weighed more toward equity, and one of the main channels through which quantitative easing helped the economy was to increase equity prices.
So quantitative easing was yet another instance of failed trickle-down economics — by giving more to the rich, the Fed hoped that everyone would benefit. But so far, these policies have enriched the few without returning the economy to full employment or broadly shared income growth.
The Fed has been forthright in pointing out the limits of monetary policy to help the economy. Fiscal policy could lead to stronger and more equitable growth, but the Republican-led Congress has demanded austerity.
Still, there is more the Fed could do. It could do more to curb excessive debit card fees and the anti-competitive charges that credit and debit cards impose on merchants. These fees lead to higher prices and lower real incomes of workers. It could also do more to encourage lending to small and medium-sized businesses.
Easiest of all, it could choose not to raise interest rates. All policy is made under uncertainty. In this case, however, the risks are one-sided: Ordinary Americans in particular will be hurt by a premature rate rise, as the economy slows, unemployment increases and there is even more downward pressure on wages.
Joseph E. Stiglitz is a Nobel laureate in economics, a professor at Columbia University and chief economist of the Roosevelt Institute.
Source: The Los Angeles Times
Yellen Says Debate Over When to Hike Now Center Stage
MarketWatch - August 22, 2014, by Greg Robb - With the economy mending, the Federal Reserve’s emphasis is “naturally...
MarketWatch - August 22, 2014, by Greg Robb - With the economy mending, the Federal Reserve’s emphasis is “naturally shifting” to the debate over when to raise interest rates, the head of the U.S. central bank said Friday.
“With the economy getting closer to our objectives, the FOMC’s emphasis is naturally shifting to questions about the degree of remaining slack, how quickly that slack is to be taken up, and thereby to the question of under what conditions we should begin dialing back our extraordinary accommodation,” Fed Chairwoman Janet Yellen said in a speech opening the central bank’s summer policy conference in Jackson Hole.
Yellen said there was “no simple recipe” for the Fed to follow, but again warned that rate hikes could come sooner than expected if progress in the labor market continued to be more rapid than anticipated or if inflation moves up more rapidly.
Balancing this more hawkish tone, Yellen said 19 labor market indicators followed by the Fed suggest the decline in the unemployment rate overstates the improvement in overall labor-market conditions.
The initial reaction in the stock market was a muted one, with the Dow Jones Industrial Average DJIA, -0.18% trading in a narrow range. Read Market Snapshot
Her comments “skirted around the issue of future monetary policy by noting that whilst there were a number of factors that might mean the labor market was less of a threat to inflation than in previous business cycles, equally, there were factors that might make it more so,” said ING economist Rob Carnell in a note to clients.
Yellen’s remarks about a shift in the Fed debate toward when, and under what conditions to tighten, lend credence to comments earlier this month from Richard Fisher, the hawkish president of the Dallas Fed, who said that the discussion among policy makers at their last meeting had moved in his direction.
Minutes of that meeting released on Wednesday were also judged by Fed watchers to be hawkish.
Perhaps sensing the shift, protestors have arrived for the first time in Jackson Hole this year urging the Fed to delay any rate hike.
Yellen gave no sense a rate hike was imminent. She noted the Fed still thinks that labor-market slack is “significant” and that the central bank has repeated it intends to hold rates close to zero for a “considerable time” after the Fed ends its bond-buying program, expected in October.
But her remarks suggest the first rate hike since 2006 is now on the table for active discussion.
Yellen and her allies on the Fed have signaled the first rate hike won’t happen until after the middle of next year. Hawks on the committee are pressing for an earlier move, and they have been vocal in speaking to reporters at Jackson Hole.
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