Few grounds for US Federal Reserve to further raise interest rates

MOST investors and analysts were not surprised when the US Federal Reserve Open Market Committee (FOMC) raised interest rates for the first time since 2006 during its meeting in December 2015. But then many of these same Fed watchers had also questioned the wisdom of that decision.

The decision by Federal Reserve chair Janet Yellen and her colleagues seemed to reflect the belief that the American economy is continuing to recover; and that under these conditions, the role of the US central bank is to take pre-emptive action against the inevitable inflationary pressures.

Indeed, during her testimony before Congress last week, Ms Yellen seemed to insist that notwithstanding the turmoil in the global economy that explained why she and the other FOMC members did not raise the federal funds rate at its latest meeting at the end of January, the Fed is now pursuing a series of preordained interest rate rises. But the disposition exhibited by the Fed to raise interest rates runs contrary to the empiricist modus operandi that one expects the economists there to embrace.