This page offers brief (and sometimes satirical) commentary on marketplace, political, and social issues.
The Fed cherishes the institutional self-perception of its independence from US political dramas. It therefore likewise does not want to be accused by its economic constituency (the so-called general public, and particularly important politicians) of playing favorites or otherwise being entangled within domestic politics.
My intuition is that in US Presidential election years, all else equal, the Fed generally prefers to delay noteworthy policy moves (Federal Funds rate changes and so forth) as Election Day nears. The window prior to the vote during which this guardian probably will not engage in important policy action is narrower than six months; around two or three months is my guess. In September (picture Labor Day)/October/very early November, the election battle is in full swing and thus probably too close. May/June are essentially pre-convention, so the Fed will seem less prejudiced (unfair, disruptive) if it acted then. July/August “as a rule” are distant enough so that the Fed would not be troubled about acting within them.
A likely qualifying consideration: when the US electorate is very divided and political tempers high, as nowadays, the Fed will be particularly wary about acting close to the election.
In 2016, the Republican convention is July 18-21, the Democratic assembly July 25-28. America votes 11/8/16.
In the current landscape (assume no emerging US economic weakness and no widespread fears of a global financial meltdown), these considerations and political dates make a Fed Funds increase in 2016 more likely than not in June (6/14-15 meeting) or July (7/26-27).
A rate hike is unlikely in the Fed’s September 20-21 meeting. Though the first formal presidential debate occurs after this (on 9/26/16), 9/20-21 is well after the conventions and only six weeks before Election Day. A rate boost is very unlikely in the Fed’s November 1-2 gathering. The December post-election Fed meeting (12/13-14/16) is a likely date, all else equal, for a Fed policy action.
Here’s a chronicle of Federal Funds rate shifts. It does not clearly unveil a bias against rate changes as the election approaches. The 2008 crisis situation of rate-cutting was exceptional.
https://www.newyorkfed.org/markets/statistics/dlyrates/fedrate.html
However, despite this murky history, the current Fed regime probably will do its best not to raise rates in the two or three months before the 2016 vote. This particular Fed crew is an especially cautious (and dovish) group. It repeatedly has underlined it will move only very gradually to normalize policy. The heated US political universe this year, which very likely will remain so, probably will encourage their reluctance to raise rates as the election approaches.
“Information is everywhere”, we’re told. We often demand: “Just give me the facts.” Haven’t you thought or even said: “Before I show you the money (or believe or behave as you want me to), show me the data”?
If you have all the data, then surely you can make the correct or best decision, right? Wrong.
The way I see the world, behind everything there’s always a crafted story, not merely a basket loaded with diligently harvested facts. In culture, there is no objective category of “the facts” or “all the facts”. Cultural players, in their quests to persuade others, always select and present what in their opinion is relevant information. Trained, practiced (and often paid) storytellers choose and manipulate “the data” to tell their story, not “the” story.
You ask me:“What storyteller?” Am I talking about best-selling novelists and screenwriters? Yes. But numerous enterprising and talented storytellers roam throughout all cultural territories. Picture Wall Street, Main Street, the Washington DC political battlefield, religious faiths, social media networks, and the legal profession. Consider corporations offering us gasoline, pharmaceuticals, homes, consumer goods and services, and entertainment. Think of economists and other social “scientists”. Imagine college humanities teachers.
Why study cultural storytellers and their stories? Focus on three Es: entertainment, education, and empowerment. Analyzing them can entertain us and satisfy our curiosity. Much more importantly, there’s inherent value in increasing our knowledge and sharpening our reasoning and judgment. Isn’t it profitable to acquire insight regarding how and why alluring propaganda is trying to get you to think and act in a given fashion? We should ask if the charming narratives designed to persuade us nevertheless could injure us. Words want action, yet action (or inaction) sometimes can cost us plenty.
Surely the wonderful Federal Reserve Board should be beloved by all Americans, for it undoubtedly has our economic interests at heart! United States stock marketplace bulls (just look at the S+P 500 at over 1850 now compared with March 2009’s bottom around 667) and corporations adore the Federal Reserve’s long-running easy money game. Debtors generally love the Fed’s policies too. Shouldn’t everyone be enamored of sustained interest rate yield repression joined to an effort to create allegedly sufficient inflation? Why question the Fed’s interpretations of its responsibilities? Why dare quarrel with its actions?
Many debtors like inflation, for it reduces the burden of their outstanding obligations. America is a major debtor nation.
A review of the Federal Reserve’s policies since end 2008 (and arguably those for several months before this) in the context of this massive American debt problem shows that the Fed for quite some time has significantly favored debtors (borrowers) at the expense of creditors (savers).
The Fed team endlessly has proclaimed its unstinting devotion to what it calls its “dual mandate” of maximum employment and stable prices. Yet Federal Reserve Act Section 2A, buried in the Fed’s website, says the Fed should promote effectively three goals, not just maximum employment and stable prices, but also “moderate long-term interest rates”. There really is a triple mandate. On the rate topic, what defines moderate and long term is unclear. Are the debt instruments involved only US Treasuries, or also corporate and municipal securities and mortgage lending rates?
Anyway, the Fed for several years has seldom bothered to focus on the language and substance of this moderate long term rate mandate requirement. Why not? Probably because the Fed seeks to avoid close scrutiny of the cheat the saver (help the debtor and borrower) strategy it married itself to during the worldwide economic crisis.
