A Nice Surprise

PUBLISHED: 10:21 PM 13 Jun 2018

Quarter Point Fed Rate Hike Signals Economic Stability

The Federal Reserve’s view on economic growth is a lot more optimistic than expected.

The quarterly report card President Trump got from the Federal Reserve gives him a solid “A” for his excellent handling of the economy.

Liberals have not been having a very good week. Not only did President Donald Trump pull off the diplomatic deal of the millennium in Singapore, the quarterly report card he got from the Federal Reserve today gives him a solid “A” for his excellent handling of the economy.

The 0.25 point increase to the overnight lending benchmark rate was expected by everyone, but the economy is projected to keep doing so well, a whole series of hikes were surprisingly scheduled to keep pace with the growth. In fact, the Fed used almost unheard-of language when describing the state of America’s economy. They plan to add more increases.

The latest adjustment raises the rate to fall in the range between 1.75 and 2.00 percent. That matches the rate of inflation, stable at around 2.1 percent.

Liberals, hoping at least one thing would go their way, were sorely disappointed again. Democrats were sure that the fed would use today’s report to give the President a slap on the wrist for starting a “trade war.” Instead, they got the exact opposite.

The whole world is hopping mad about the extensive tariffs on things like steel that Trump slapped on imports, but the fed agrees they are just what we need to level the playing field. For over a decade we have been cheated at every turn.

“Trump’s tariffs are seen by many as the top threat to the U.S. economy, especially if a full-blown trade war erupts,” the Washington Post reported. But, they were wrong. Big time.

President Trump likes trade wars. He says they are “good and easy to win.” He proved that already with China. After one weekend of negotiations, an intellectual property rights deal was hammered out.

“The trade war that Donald Trump threatened against China in March has not just been placed on hold – although official statements suggest so – it is for all intents and purposes over,” the South China Morning Post writes.

John Williams is currently the head of the San Francisco Fed and soon to be moved to New York. He warns, “If the conflict increases there will be less growth, more inflation and lower quality of life all over the world.”

Liberals huddled around their television monitors waiting for the announcement at 2 p.m. EST, convinced the report would mention trade “as a headwind.” It didn’t happen. All the indicators are glowing green, even after factoring in Trump’s new trade taxes.

President Trump’s -trillion in “combined tax cuts and planned government spending” will more than offset the temporary trade disruptions. Fed Governor Lael Brainard explains, “the sizable fiscal stimulus that is in train is likely to provide a tailwind to growth in the second half of the year and beyond.”

The economy is so stable the fed actually removed the “training wheels” it had to have under Barack Obama to keep it from falling flat.

“The Fed dropped its pledge to keep rates low enough to stimulate the economy ‘for some time’ and signaled it would tolerate above-target inflation at least through 2020,” Reuters notes.

Economic growth is roaring along at a right-now rate of 4.6 percent. That number works kind of like gas mileage. It makes a difference on whether you are non-stop on the freeway or idling in traffic. For the past year, President Trump has had the economy rocking down the highway.

Over the long haul, the growth rate is expected to average out around 3 percent. Economists are still trying to add a little safety factor so the official estimate is around 2.8 or 2.9 percent growth in the overall economy.

Unemployment is no longer a factor, all the way down to 3.8 percent. That is the lowest reading since 2000. By 2009, under Barack Obama, unemployment had ballooned to 10 percent.

Now, there are more jobs than applicants. “This is the most lopsided, mismatched labor market in the nation’s history,” Chris Rupkey advises. According to the chief financial economist at MUFG Union Bank, “The labor market is on fire.”

The statement released today by the Federal Reserve says that things are going so well, not only is the expected rate bump officially issued, there will probably be two more this year for a total of four.

The Federal Open Market Committee is the group who releases the report. Instead of using the same standard boilerplate language that has been used in the past, there are many refreshing changes pointing to optimism on the horizon.

Instead of calling the economic growth “moderated” as they did in their May monthly report, the committee reports it as “rising at a solid rate.” The unemployment rate has “declined,” which is an improvement over “stayed low.” Household spending has “picked up,” where before it was “moderated.”

“The committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2 percent objective over the medium term.”

There were some upgrades in that phrase too. Instead of calling the hikes “gradual adjustments” which could go up or down as indicated, they make it clear the changes will all be “increases.” The words “sustained expansion” are brand new.

Next year, the committee anticipates making another three boosts to the rate. By structuring a schedule of regular increases they are sending a clear signal that they think the economy has fully recovered from the “Great Recession.”