Intelligence

Some thoughts on the Fed’s rate rise

ibby

Ibby Hussain

Account Executive

For our continuing dynamic logo campaign, in which we adapt our logo according to recent news, we’re drawing attention to the Fed’s quarter-point interest rate hike, which it announced last week after months of signaling.

The Fed’s announcement was, in a word, interesting. As New York Magazine observed, the change was rolled out as quietly as possible:

[Fed Chairwoman] Janet Yellen was extremely careful to signal there was nothing especially newsworthy going on. The language of the announcement from the Fed’s rate-setting Open Market Committee tracked as close to prior statements as possible.

And The Wall Street Journal’s Joshua Zumbrun piled this on:

The rally in stocks? Some new folks taking office in Washington? If you think this has major macroeconomic significance then you’re thinking about it differently, apparently, than the Fed.

The rate rise is noteworthy in part because it comes amid heavy speculation that the White House will lobby Congress to lower tax rates and spend more money. Yellen’s remarks last Wednesday “appeared to be a tacit warning against simply pursuing big tax reductions, a top White House priority,” Politico reported:

The central bankers worry that Trump and the Republican Congress will soon pump trillions of dollars into the economy through tax cuts and infrastructure spending. The Fed could offset the stimulative impact of these moves with higher rates, making it harder for the president to drive down the jobless numbers or create the 3 percent to 4 percent growth he pledged during the campaign.

Whatever they end up being, the consequences of the rise in rates — both the economic and the political — will no doubt be a theme worth following into the spring and beyond.

What are your thoughts on the rate rise? Let’s talk about it.

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