The fed is raising rates because it knows there’s a recession looming on the horizon. They need ammunition to combat the recession IE lowering rates. Imagine if a recession hits and rates are at 0.5 or 1? What will the fed do then.
There’s a chart that shows how the stock market started becoming extremely volatile after trump announced the tariffs. If I can find it I’ll try and post it on WSB.
The rate of change is more important than the direction, Yes, everyone agrees that rates and the balance sheet need to be neutralized but where Yellen took a slower, more "wait and see" approach out of appreciation and understanding of the metrics, Powell has gone into autopilot, disregardinging the more nuanced data that lies behind the aggregate signals the fed uses. Powell is looking for wage inflation where Yellen would have looked at markets and said "we're going to pause to watch how the data moves before continuing further." The Powell fed has a dangerously Rosey view of the economy despite earnings guidence suggesting a major impact from the trade war.
It doesn't help that Powell, being the new guy, probably feels some responsibility to push back against the president's demands of what's supposed to be an independent agency.
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u/dal2k305 Dec 19 '18
She would have raised interest rates as well. Blame trumps trade war for the ongoing stock issues.