They are fighting a new type of economic battle with the same approach. Even though they hint the issues may be different this time.
On Wednesday May 3rd the Federal Reserve’s policy committee lifted interest rates by a quarter of a percentage point, the 10th hike of this current cycle.
The increase takes the fed-funds rate to a target range of 5.00% to 5.25%, its highest since 2007. While the FOMC’s statement hinted at a pause, Chairman Jerome Powell said during his news conference that the central bank was prepared to lift rates higher if needed and that cuts were unlikely to happen this year.
“It’s possible that this time really is different,” Mr. Powell said Wednesday May 3rd“…We’ve raised rates by five percentage points in 14 months and the unemployment rate is 3.5%, even lower than where it was when we started.”
That’s the conundrum they’re facing, this is not in their models, they’re not able to explain it. This time is different. Economists are going to be studying this for the next 20 years.”
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