Why did the Fed raise its benchmark interest rate when inflation is still running below the Fed’s target, workers wages have hardly budged and the economy is not even growing at 1 percent?
Yellen was asked that question at a press conference on Wednesday following the release of the FOMC’s statement. Her answer helps to show how the Fed makes its policy decisions based on factors most people would never consider. Here’s what she said:
Janet Yellen– “Well, look, our policy is not set in stone. It is data-dependent and we’re — we’re not locked into any particular policy path…As you said, the data have not notably strengthened.”
Translation– So after saying the Fed bases its decisions on the data, Yellen does a quick 180 and says the data hasn’t changed. Okay.
Janet Yellen– “There’s always noise in the data from quarter to quarter. But we haven’t changed our view of the outlook.”
Trans– The Fed expects economic growth will remain in the doldrums. (2 percent or less)
Janet Yellen– “We haven’t boosted the outlook, projected faster growth.”
Trans– The Fed is determined to maintain a slow-growth environment in order to continue its “easy money” policy which benefits Wall Street.
Janet Yellen– “We think we’re moving along the same course we’ve been on, but it’s one that involves gradual tightening in the labor market.”
Trans — Ah ha. Now we’re getting somewhere. Now we can see…