Summary: Usually we can only guess at the motives of our senior officials. But on rare occasions they give us clues to their real priorities and objectives. The Fed is especially opaque, so we speculate about their odd rate increases during a slow and slowing economy. Yesterday Janet Yellen explained why. The answer is shocking (to those who do not know the Fed’s history).
From TIME’s transcript of Janet Yellen’s press conference, where she explains why the Fed raised rates in a slow economy. Bloomberg reporter Kathleen Hays asks why. The answer should be read by every citizen. Yellen confirms the suspicion long held by many of us: the Fed serves our corporate rulers. Among other things, they fight “wage inflation” — aka workers sharing benefits of America’s rising productivity.
This transcript has been lightly edited for clarity.
Hays: I’m going to take the opposite side of this, because — and this question about market expectations, and how the markets got things wrong, and then how you say the Fed suddenly clarified what it already said. But if you look at the Atlanta Fed’s latest GDP tracker for the first quarter, it’s down to 0.9 percent. We had a retail sales report that was mixed. …the consumer does not appear to be roaring in the first quarter …
If you look at measured of labor compensation, you note in the statement that they’re not moving up. …And you yourself said …that is perhaps an indication there’s still slack in the labor market.
…What happened between December and March? GDP is tracking very low. Measures of labor compensation are not threatening to boost inflation any time fast. The consumer is not picking up very much. Fiscal policy, we don’t know what’s going to happen with Donald Trump. And yet, you have to raise rates now. So what is the motivation here? The economy is so far from your forecast in terms of GDP, why does the Fed have to move now? What does this signal, then, about the rest of the year?