Washington, D.C. — Michael Madowitz, Economist at the Center for American Progress, released the following statement today after the Federal Reserve announced its intent to raise interest rates 0.25 percent, or 25 basis points. The announcement arrives after the Federal Open Market Committee, or FOMC, met yesterday and today in Washington.
Indicators in the real economy clearly show that the economy remains on a stable trajectory with little inflationary pressure—which should mean that the Fed doesn’t need to raise rates—but the combination of proposed financial deregulation and a Congress and president eager to run up deficits by slashing taxes for the wealthy may well be encouraging the Fed to raise rates to forestall financial instability or inflationary pressure.
If it gets its way, the current administration will pursue big giveaways to the wealthiest Americans, and the Fed is doing its job to keep these changes from destabilizing the broader economy. Absent a change in policy direction, we’re likely to see the Fed raise rates significantly over the next year, slowing the labor market further and hurting the trade deficit.
In the mid-1990s, a combination of narrowing federal budgets and sensible, data-driven policymaking allowed the Fed to fulfill its dual mandate by holding down rates in the face of low unemployment. The result was a strong job market that raised incomes for all Americans, put millions back to work, and produced budget surpluses. The current administration must move quickly to add professional economic staff to the government in order to improve its ability to formulate effective policy and work with the Fed to ensure a stable and healthy economy.
For more information or to speak with an expert, contact Allison Preiss at [email protected] or 202.478.6331.