To the Fed's credit, it is reportedly taking the needs of the labor market into consideration to a much greater degree than it has in the past. Fed Chair Janet Yellen appears to be more deeply committed to its dual mandate than her immediate predecessors. But many voices within the Fed, including Vice Chair Stanley Fischer, appear to be pushing for an increase.
Rate increases are appropriate when the economy is overheating, which is not the experience of most Americans today. And recent moves to counter inflation have been misguided. In fact, as Neil Irwin notes, "since the global financial crisis, when major central banks have erred, it has been overwhelmingly -- perhaps exclusively -- in the direction of excessive fear of inflation and complacency about growth."
In other words, central bankers have been trying to fix the wrong problem. If the Fed raises rates tomorrow, it will be making the same mistake.
The Fed's answer is expected Thursday afternoon, but the surprise is that there's any question at all what it will do. That suggests that our economic debate is not yet grounded in economic reality, at least as most Americans experience it.
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