> Continuing its usual election year pattern when Republicans control
> the White House, the Federal Reserve Board hasn't raised interest
> rates since the end of June, when the Fed set the rate at 5.25%.
> (The rate was raised to 6.5% for 2000's stolen election. Quickly,
> it was dropped to a mere 1.75% for 2002 and 2004.) Now, after
> raising the rate steadily since then, the increase was capped in
> June. The Stock Market has responded and we'll be seeing all sorts
> of blather about the Dow "reaching its all-time high"--11,722.98--
> by November 7th. (The Dow is at 11,611.67 as I write this.)
There's nothing unusual about the Fed's behavior. After raising interest rates at 17 consecutive meetings, it was time for a pause. They seem to have gotten what they wanted - an economic slowdown. Job growth slowed from about 175,000 a month in the first quarter to about 120,000 in the last few months, and it looks like we may have seen the low in the unemployment rate for the cycle. Oil and other commodity prices have come well off their highs, and the housing market looks like it's cracked. The yield curve is inverted - i.e., short-term rates are higher than long-term rates - which usually portends further slowdown (and is a sign that the bond market sees Fed policy as tight, since the inversion suggests they expect short- term interest rates will be heading downward soon). If anything, Wall Street had expected the Fed to pause sooner than June. So they're not pimping for the GOP.
Doug