It’s really interesting to read the financial presentation of Reuters in their article outlining the Fed, Chair Janet Yellen, decision to raise interest rates a quarter point (.25).  Keep in mind that Reuters traditionally slants left (globally) on all economic presentations.
Those Treepers who have followed our economic analysis will note the disparity between Yellen’s justification and the inconsequential impact therein.   The Stock Market never even flinched today.  Part of the reason is the disconnected (traditional) view of economics within the current Yellen justifications.  It ain’t just us who sees this “new dimension“.

Emphasis in citations are all mine.

(Reuters) The U.S. Federal Reserve raised interest rates on Wednesday for the second time in three months, a move spurred by steady economic growth, strong job gains and confidence that inflation is rising to the central bank’s target.
The decision to lift the target overnight interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent marked one of the Fed’s most convincing steps yet in the effort to return monetary policy to a more normal footing.

{define “normal”}

However, the Fed’s policy-setting committee did not flag any plan to accelerate the pace of monetary tightening. Although inflation is “close” to the Fed’s 2 percent target, it noted that goal was “symmetric,” indicating a possible willingness to allow prices to rise at a slightly faster pace.

{code-speak for: we don’t anticipate our efforts having any impact.}

Further rate increases would only be “gradual,” the Fed said in its policy statement, with officials sticking to their outlook for two more rate hikes this year and three more in 2018. The Fed lifted rates once in 2016.
Business investment “appears to have firmed somewhat,” the Fed said in language that reflected a stronger sense of the economy’s momentum.

{appears to?  LOL. grumpy spinners gotta spin}

Fresh economic forecasts released with the statement showed little change from those of the December policy meeting and gave little indication the Fed has a clear view of how the policies of Donald Trump’s administration may impact the economy in 2017 and beyond.

{insert fed political policy operatives gritting teeth and shouting “curse you villain” as they ignore all current economic measures showing intense change.  Changes the financial markets have already noted and predicted upon}

[…]  The Fed’s projections showed the economy growing by 2.1 percent in 2017, unchanged from the December forecast. The median estimate of the long-run interest rate, where monetary policy would be judged as having a neutral effect on the economy, held steady at 3.0 percent.

{¹everyone other than the fed can see -and measure- substantially larger economic expansion.  ²Additionally the fed is saying nothing they do with interest rates will have any economic effect because large MACO growth (production expansion/GDP) is increasing at essentially the same rate as smaller MICO impacts (measured inflation).}

The unemployment rate Fed officials expect by the end of the year was unchanged at 4.5 percent, while core inflation was seen as slightly higher at 1.9 percent versus the previous 1.8 percent forecast.  (read more)

This last paragraph is a little funny.  The economy continues to add more jobs than the percentage unemployment rate measures can assign.  Meaning, people are gaining jobs who were not considered “unemployed”…. ergo, the unemployment rate cannot necessarily change – because the employees now working were never counted as not working.   This is a bit funny.
She, or really ‘they’, have no idea what’s going on with “core inflation” because the measured units don’t count the high consumables (energy, fuel or food).  They’re only measuring materials, durables and housing.
If you remember what we said was going to happen with durables and housing, you can see why the Fed is stuck measuring inflation as minimal, yet WAGES are now going up.
Wages are going up, by a factor twice the claimed inflation rate of Yellen, because inflation is increasing – but the fed doesn’t measure high-turnover consumables (food, energy, fuel) in their inflation stats.  See the disconnect?
These admissions, while subtle and often only noted between the words, are more evidence this new 2017 economic dimension is real; and more importantly, the predictions that come from within this new economic dimension will eventually prove accurate.
The two economic engines (Wall Street and Main Street), each fueled by differing policy, are too far apart for DC Monetary Policy to have any substantial impact.    It is going to take at least two fiscal years before the engines are close enough to have a cause and effect relationship.
Mrs. Yellen can keep on minimally raising interest rates (at least for a year) and the economy will flick it off like a flea falling into a furnace.
The New Dimension Explained

Share