Fed hikes as economic policy for all seasons
THE
Federal Reserve is getting tough. Not only did Chairman Jerome
Powell’s Fed raise interest rates by a quarter of a percentage point Wednesday, but it also said there would be two more hikes this year instead of the one increase most people were expecting.
The so-called Fed funds rate was immediately increased that quarterpoint to between 1.75 percent and 2 percent. Another rate hike is expected in September, and the fourth one of 2018 will probably come in December.
I’ve already gone through this in previous columns. That fourth hike was still up in the air, but inflation has been getting worse, and December has become a traditional time for the Fed to flex its muscle.
On Wednesday, the Labor Department also announced that the producer price index (PPI) for May rose 0.5 percent.
The experts only expected a 0.3 percent PPI rise. The May increase was well above the 0.1 percent rise in April.
Inflation on the producer level has now risen 3.1 percent in the last 12 months, which is also above estimates. Even if you don’t count food and fuel, the increase in producer prices was 2.6 percent in the last year.
But there’s a question as to just how bad inflation really is. The PPI had gasoline prices up 9.8 percent in May. But the consumer price index, which rose only 0.2 percent last month, had gasoline prices only 1.7 percent higher.
One of those gasoline figures is obviously wrong. So either the PPI or the CPI is giving a misleading reading.
The Fed’s goal is to have the economy growing nicely — but with inflation only in the 2 percent annual area. If prices rise more than that, the Fed will be forced to boost borrowing costs even faster by raising rates.
Fed boss Powell sounded optimistic about the economy in his press conference Wednesday.
There’s no law that says the Fed has to raise rates at quarter-point intervals. Nor is there a rule that says rate hikes can’t be announced be- tween the official meetings of the Federal Open Market Committee, which concluded this month’s session Wednesday.
Nor is the Fed obligated to hike rates just because it has publicly said it will do so.
The Fed will probably also get pressure from Congress to slow the rate hikes. The federal deficit widened by 23 percent in the first eight months of the government’s fiscal year, largely because of the tax cut instituted last December.
And every time the Fed raises rates, it costs Washington (just like everyone else) more to borrow money, and the deficit rises.
Wall Street will be waiting to hear what the European Central Bank has to say after its meeting Thursday.
The long-awaited report from the inspector general of the Justice Department is expected to come out Thursday.
It’s probably going to show wrongdoing by top officials of the FBI and maybe the CIA in regard to the investigation into Hillary Clinton’s missing e-mails.
The more damaging it is to those intelligence agencies the better it is for President Trump — and that will be cheered by the financial markets.
The next step is what Wall Street should be worried about. What will the Democrats’ reaction be?
Not surprisingly, there were leaks Wednesday that the president’s personal attorney, Michael Cohen, is about to cooperate with Special Counsel Robert Mueller.
If Cohen has anything that puts the president in jeopardy, Wall Street won’t like it.
And if all of this leads to that oftused phrase “constitutional crisis,” investors really won’t like it. It’s gonna get exciting.
New Jersey Thursday will finally let people place bets on n sporting events. I’m going to Monmouth Park at 10:30 a.m. to be one of the first.
Although you can’t wager on this, I bet Jersey will somehow screw up opening day.
Recently I wrote about a scam being pulled by prisoners who pretend they have physical and mental problems so they can go on the public dole once released. They do this by feigning illnesses, getting drugs prescribed and then spitting out the pills in the prison courtyard.
A former prison guard wrote me a letter that explains what’s going on. It might even make anyone except ardent animal rights activists chuckle.
Mr. Crudele: I retired after 27 years in New York State Corrections, of which 22 were as a sergeant. So many of the state facilities actually have social workers and case workers whose full time job is to get inmates approved (for disability payments)!
We laugh and call the front of the Medical Building “Skittles Land,” since, in the snow, the thousands and thousands of mental health drugs that are … spit out are coloring the ground. Or the inmate sells them to other inmates who want to get high.
My last facility was Mid-State Correctional (Marcy, NY) and I’m here to tell you we had problems for years with squirrels and skunks eating the damn medications. We’d have tailless squirrels from running through the razor wire to get the meds and we have literally had an officer attacked on the walkway by a stoned squirrel.