Weekend Reading: Noah Smith: Reviewing Ben Bernanke's "The Courage to Act"

Must-Read: I confess I could understand FOMC participants wanting to raise interest rates right now if projected growth over 2016 was 3.5% or higher. But we have a first quarter of 0.8% and a second quarter of 2.3%: we may well not even get to 2.0% this year.

I confess I understand FOMC participants worrying about "imbalances" created by extremely-low interest rates, but:

  1. If they are worried about extremely-low real interest rates, they need to be all-in pressuring the Congress for more expansionary fiscal policy.

  2. If they are worried about extremely-low nominal interest rates, they need to be all-in pressuring their colleagues for a higher inflation target.

It's the absence of either of those two from the Fed hawks--and the Fed moderates--that has me greatly concerned:

Tim Duy: Fed Watch: Fed Speak, Claims: "The Fed is not likely to raise rates in June...

...But not everyone at the Fed is on board with the plan. Serial dissenter Kansas City Federal Reserve President Esther George repeated her warnings that interest rates are too low.... Boston Federal Reserve President Eric Rosengren... reiterated his warning that financial markets just don't get it....

I would suggest that the failure of policymakers to better manage the economy at turning points is not because it is impossible, but because they have overtightened in the latter stage of the cycle, forgetting to pay attention to the lags in policy they think are so important during the early stages of the cycle....

Bottom Line: Ultimately, I suspect the FOMC will not find sufficient reason in the data before June to convince the Fed that growth is sufficiently strong to justify a hike. Hence I anticipate that they will pass on that opportunity to raise rates. Look for an opportunity in September.... I doubt, however, that most on the Fed are pleased that market participants have already priced out a June hike on the basis of the April employment report.... They do not see the outcome as already preordained.