Friday, August 29, 2025
  • About Us
  • Contact Us
  • Privacy Policy
  • Terms & Conditions
  • Email Whitelisting
Best Retirement Wishes
  • Economy
  • Editor’s Pick
  • Investing
  • Stock
  • Top News
No Result
View All Result
Best Retirement Wishes
Home Stock

The Fed Should Continue to Hold Steady

by
July 12, 2023
in Stock
0
0
SHARES
8
VIEWS
Share on FacebookShare on Twitter

Jai Kedia

From the moment the Fed announced its decision last month to hold target rates steady, it seemed a future rate hike was inevitable. Minutes from that FOMC meeting already showed some disagreement, with a few voices such as Dallas Fed President Lorie Logan publicly calling for further rate increases. Additionally, Fed Chair Powell’s description of June’s rate pause as a “skip” (he immediately walked it back) indicated that future FOMC meetings would conclude with rate hikes.

Related posts

Shakedowns and a Sovereign Wealth Fund

Shakedowns and a Sovereign Wealth Fund

August 29, 2025
How the Argument of Murder the Truth Erodes Accountability and the Value of Free Expression

How the Argument of Murder the Truth Erodes Accountability and the Value of Free Expression

August 29, 2025

In a post last month, we credited the Fed for its decision to keep target rates unchanged, an improvement from its earlier Covid‐​era policymaking. The available evidence from macro indicators such as inflation and unemployment simply did not warrant a rate hike. With the Fed seemingly set to increase rates again, we reiterate our recommendation that the Fed should keep its target unchanged.

Our previous post detailed the flattening of average month‐​to‐​month inflation (as measured via the Consumer Price Index). The inflation numbers released today continue along the same trend. The CPI increased only 0.2% from May to June – an annualized rate of 2.4% — keeping it within range of the Fed’s 2% inflation target. As we have pointed out before, the correct measure of inflation is short‐​term indicators like month‐​to‐​month, not year‐​over‐​year price changes (which is currently at 3%). This is because the annual rate may remain elevated, especially when keeping last year’s extreme inflation in mind, even though the monthly changes stay flat.

The newest CPI numbers do not indicate any need for a rate hike. The Taylor rule, an approximate relation between Fed policy and its dual mandate macro indicators – inflation and unemployment, would not advise a rate increase either. Here is a simple version of the Taylor rule:

FFRt = 0.8 x FFRt‑1 + ( 1 — 0.8 ) x [ 1.5 x Inflationt –
0.5 x ( Unemployment Ratet — NAIRUt ) ]

In June, the realized federal funds rate (FFR) was 5.08%. Latest month‐​to‐​month CPI inflation was 0.2% – annualized to 2.4%. Using June’s unemployment rate of 3.6% and a 4.42% natural rate (NAIRU), the implied FFR for July should be:

FFRJuly 2023 = 0.8 x ( 5.08% ) + 0.2 x [ 1.5 x ( 2.4% ) –
0.5 x ( 3.6% — 4.42% ) ] = 4.866%

So, the Fed’s target range of 5.0 to 5.25% is already above the rule implied rate. The standard policy rule does not indicate any reason to keep raising rates; if anything it suggests a slight lowering of the target to a 4.75 to 5% range.

To reiterate, there are dangers to the Fed raising its rate target by too much, or too quickly. It may worsen credit market conditions and reduce economic activity, triggering a recession.

We restate the recommendation from our prior article:

The recent inflation figures appear to be on the right track, with annualized rates getting closer to the Fed’s regular 2 percent target. Given the stakes, holding steady makes perfect sense.

Previous Post

My Washington Post Letter to the Editor about Portugal’s Drug Decriminalization

Next Post

States Can Curb Federal Power through “Soft Secession”

Next Post
States Can Curb Federal Power through “Soft Secession”

States Can Curb Federal Power through "Soft Secession"

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

RECOMMENDED NEWS

Franco as a Case Study of Mises’s Claim That Fascism Saved European Civilization

Franco as a Case Study of Mises’s Claim That Fascism Saved European Civilization

2 years ago
Ummm, @PeterGleick, I addressed this 5,958 days ago: Free markets are, in fact, not free

Ummm, @PeterGleick, I addressed this 5,958 days ago: Free markets are, in fact, not free

3 years ago

Hotelling’s switch point just got later

3 years ago
Governor Newsom Bars Californians from Self-Medicating with Psychedelics

Governor Newsom Bars Californians from Self-Medicating with Psychedelics

2 years ago

BROWSE BY CATEGORIES

  • Economy
  • Editor's Pick
  • Stock
  • Top News
Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

POPULAR NEWS

  • How not to answer the question “Why are carbon taxes unpopular with policymakers and politicians?”

    0 shares
    Share 0 Tweet 0
  • How Can We Restore Freedom and Sound Money in the US and the UK? Some Ideas

    0 shares
    Share 0 Tweet 0
  • The New Deal and Recovery, Part 28: A New Deal for Housing

    0 shares
    Share 0 Tweet 0
  • You Can’t Depend on the State to Maintain Public Order

    0 shares
    Share 0 Tweet 0
  • Remember the Alamo! Moses Rose’s Last Stand

    0 shares
    Share 0 Tweet 0

Disclaimer

BestRetirementWishes.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Recent News

  • Shakedowns and a Sovereign Wealth Fund
  • How the Argument of Murder the Truth Erodes Accountability and the Value of Free Expression
  • Inflation and Food Debasement

Category

  • Economy
  • Editor's Pick
  • Stock
  • Top News

Recent News

Shakedowns and a Sovereign Wealth Fund

Shakedowns and a Sovereign Wealth Fund

August 29, 2025
How the Argument of Murder the Truth Erodes Accountability and the Value of Free Expression

How the Argument of Murder the Truth Erodes Accountability and the Value of Free Expression

August 29, 2025
  • About Us
  • Contact Us
  • Privacy Policy
  • Terms & Conditions
  • Email Whitelisting

© 2021 BestRetirementWishes. All Rights Reserved.

No Result
View All Result
  • About Us
  • Contact Us
  • Email Whitelisting
  • Home 1
  • Privacy Policy
  • suspicious-engagement
  • Terms & Conditions
  • Thank You

© 2021 BestRetirementWishes. All Rights Reserved.