by Dirk Ehnts, Econoblog101

The Federal Reserve Bank thinks about moving interest rates up – or doesn’t it?

The NYT reports:

Conservative activists who want the Federal Reserve to raise interest rates distributed chocolate coins in golden wrappers at the local airport last week as Fed officials arrived for their annual policy retreat.

Liberal activists in green “Whose Recovery?” T-shirts formed a receiving line at the resort hotel in the heart of Grand Teton National Park where the meeting was held, to personalize their argument that the Fed should wait.

The quick&easy answer to the question of moving interest rates up is a look at the chart depicting the civilian employment to population ratio:


Everybody on board? No, apparently not – some people who had been employed before the crisis still haven’t found a job. Hence, inflation is very unlikely to show up, since employers know that there is a lot of (hidden) unemployment out there and will be able to keep wages rising only very slowly. Count me as a liberal activist in this one. (Given that inflation is low – see chart below.)


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