Fed keeps interest rates the same but Washington politicians remain a threat: CEI analysis

As expected, the Federal Reserve today left interest rates unchanged at its Open Market Committee meeting today. CEI Senior Economist Ryan Young warns the biggest inflation risk right now is Washington.

“The Fed is in wait-and-see mode on inflation. While today’s pause isn’t harmful, it might have been wiser to raise rates by a quarter of a percentage point. Inflation is lower than it was a few months ago, but it is still almost double the Fed’s two percent target. A growing economy and low unemployment give the Fed some maneuvering room if officials are still scared of sparking a recession.

“The biggest inflation risk right now is another spending burst from Washington. An upcoming farm bill could add more than $100 billion per year to federal spending, and a likely omnibus could add even more.

“Market forces are pushing interest rates up on top of what the Fed is already doing, which helps. But Congress and President Biden are not interested in fiscal responsibility, and the Fed will have to help finance their excesses. Continuing interest rate hikes and responsible monetary policy are the best tools the Fed has to convince markets that it takes inflation seriously, since the political branches do not.”