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Yellen’s gamble

8 38 16
31.07.2017

Janet Yellen, the chair of the Federal Reserve, is caught between President Trump and a hard place. By most accounts, Trump is an “easy money” guy who would prefer to keep today’s low interest rates to boost job creation. For her part, Yellen has committed the Fed to a gradual rise in rates and a tightening of credit. The idea is to preempt unwanted inflation or financial speculation in an economy at or near “full employment.” At 4.4 percent in June, the unemployment rate is down from a recent peak of 10 percent in October 2009.

The Fed began credit tightening in December 2015 when it ended seven years of zero short-term interest rates. The Fed has raised the overnight Fed funds rate four times to its present range of 1 to 1.25 percent. Even at this level, credit is easy. Short-term rates are below current inflation, now about 1.6 percent annually. Rates on home mortgages and business loans are higher, but still historically low.

The question now is whether the........

© Washington Post