Tags: Crudele | Fed | rate | jobs

NY Post's Crudele: Fed Headed Toward Irrelevance

By    |   Thursday, 12 March 2015 07:00 AM

The Federal Reserve is in a tight spot, says New York Post columnist John Crudele. Last Friday's strong February jobs report is pushing the central bank toward raising interest rates, perhaps in June.
 
But the economy really isn't very strong, Crudele says. So a rate hike would be damaging to the Fed's credibility.
 
"The last thing anyone should want is a central bank that's powerless to control inflation, boost the economy, keep banks in line and use its verbal persuasion on the financial markets," he writes.
 
"But that's where we are headed."
 
As for the employment data, the unemployment rate slipped to an almost-seven-year low of 5.5 percent last month. And non-farm payrolls rose 295,000, representing the 12th straight month with a gain of at least 200,000. That's the longest such streak since 1995.
 
But other recent indicators have signaled weakness, including construction spending, income growth, industrial production and housing starts, Crudele notes.
 
And the Atlanta Fed recently announced that as of March 6, its GDPNow measurement pointed to GDP growth of just 1.2 percent for the first quarter.
 
"If a booming jobs report forces the Fed to raise interest rates — which will be the prevailing view until the economic data sours again — then a good jobs report is bad news for stocks . . . since stocks have been propped up by the Fed's ultra-low interest rates," he adds.
 
"Both the unemployment rate's decline and the alleged sharp rise in new jobs will play a large part in the Fed's discussion next week about interest rates. Wall Street is worried that the Fed will no longer say it can be patient before making a move. If the Fed does change the language of its post-meeting communiqué, then it will have buckled to the reaction to last Friday's misleading employment report. And then the Fed is truly in a quandary."
 
Meanwhile, Nobel laureate economist Paul Krugman isn't so hot on the idea of the Fed raising rates around mid-year, as most analysts expect.
 
Is the economy strong enough to warrant a rate hike? "I don't know, but neither does the Fed," he writes in The New York Times.
 
"The question, then, is what to do in the face of that uncertainty, with no inflation problem yet in sight." The Fed's favored measure of inflation registered only 0.2 percent in the 12 months through January.
 
"To me, as to a number of economists — perhaps most notably Lawrence Summers, the former Treasury secretary — the answer seems painfully obvious: don't yank away that punch bowl, don't pull that rate-hike trigger, until you see the whites of inflation's eyes."
 
The Fed has an inflation target of 2 percent. "If it turns out that the Fed has waited a bit too long, inflation might overshoot 2 percent for a while, but that wouldn't be a great tragedy," Krugman says. "But if the Fed moves too soon, we might end up losing millions of jobs we could have had."
 
Related Stories:

© 2020 Newsmax Finance. All rights reserved.


   
1Like our page
2Share
StreetTalk
The Federal Reserve is in a tight spot, says New York Post columnist John Crudele. Last Friday's strong February jobs report is pushing the central bank toward raising interest rates, perhaps in June.
Crudele, Fed, rate, jobs
495
2015-00-12
Thursday, 12 March 2015 07:00 AM
Newsmax Media, Inc.
 
Newsmax TV Live

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved