I sound like a broken record, but I’m just the messenger – the Fed failed to raise rates yet again. It seems like our central banking institution will use nearly anything as a reason to not increase the federal funds rate, which is still being held to “emergency” levels until the economy recovers. Lately, the Fed cites lower-than-expected GDP and a lackluster unemployment report.
Last quarter’s GDP rose by 1.5%, according to initial reports (they’ll be revised in December). It’s down from Q2 2015′s 3.9% and slightly below the pre-report consensus Q3 estimate of 1.7%. But the fact remains, the economy grew by 1.5%!
The Fed knows this. It acknowledges the economy is growing at a “moderate” pace and that household spending has increased slightly. But – and for them, this is a HUGE but – the pace of job creation slowed since the group’s last meeting. Thus, the rate remains.
There’s a lot going on in our economy, to be sure. The market does one thing, employment does another, GDP is up but not enough…the list is endless. And we’d all like to be doing better. However, at some point, even in the face of what it considers evidence, the Fed has to concede that the economy is much improved from its fragile state of 2008. And then it should hike the rate accordingly.