We at The Bahnsen Group have been clear in our forecast that you will not raise rates at the coming meeting of the FOMC September 16 and 17. In fact, I recently went all-in on this forecast on CNBC. The purpose of this letter is to plead for you to make me wrong.
The arguments for why we do not believe you will raise are simple:
1) You stated you’re targeting a 2% inflation rate, and you certainly aren’t getting it yet.
2) A headline unemployment number of 5.1% looks well below the level needed to justify a rate increase, but the internals are uglier than 5.1% would suggest – anemic wage growth, and high under-employment as measured by part-time workers who want full-time work and people leaving the labor force.
3) Perhaps most significantly, we believe the Fed views part of their job as enabling asset price growth, and recent events in Europe (July) and then China (August) suggest that more global asset price instability lies ahead, leaving you feeling vulnerable about the impact of a rate increase at this time.
So we believe that for these three reasons you are unlikely to yet raise rates.
But our opinions about what will happen should not be confused with what we believe ought to happen. We would be remiss if we did not point out the obvious:
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