Fed drags its heels in raising rates

The US Federal Reserve is running out of excuses for not raising interest rates.

"Waiting too long to remove accommodation would be unwise," said US Federal Reserve chair Janet Yellen last week, meaning she would not raise interest rates yet. She said this "with no hint of irony", says Liam Halligan in The Sunday Telegraph. "No matter that, for years, too-low-for-too-long interest rates have hammered savers worldwide" and $10trn of bonds sport negative yields a result of billions of dollars printed and injected into economies and markets.

So accommodative, or loose, has monetary policy been that eight years into the recovery the benchmark interest-rate in the US is still below 1%. There have been a mere two quarter-point rises, bringing the key rate to 0.75%. Yet the Fed is now "running out of credible excuses not to raise", as Halligan says. GDP growth is robust; consumer confidence recently hit a 15-year high; and the unemployment rate has fallen to a post-crisis low of 4.8%. Wage growth has reached a post-crisis high and is set for further increases as the labour market is at or close to full employment.

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Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.