3 ms·
The Fed wants to keep rates as low as possible because their mandate is to keep inflation at 2% and maximize employment. If inflation is at or under 2%, then lo
by rcme 4y ago
The Fed wants to keep rates as low as possible because their mandate is to keep inflation at 2% and maximize employment. If inflation is at or under 2%, then lowering rates will increase economic activity and increased economic activity will reduce unemployment.
- nostrademons 4y agoThe unemployment rate is now 3.6%, about the lowest it's ever been. Where are these workers going to come from? The Fed has been very explicit that they need to tighten labor market conditions. "Tighten labor market conditions" = "cause layoffs". That's how it works, they just can't say it out loud because it'll spook people. They can't bring down inflation until they raise rates high enough that companies start going under, and they have no incentive to lower rates unless actual bad things are happening in the real economy. (Remember also that when rates are high, the Fed has more room to cut when actual bad things do happen, because there's a floor at zero.)