Fed rate hike in June?

I think the Fed will raise the Fed Funds rate on overnight deposits by 25 basis points in June.

Five reasons:

–I think the economy is in considerably better shape than the consensus realizes

–We’ve been in intensive care for close to a decade.  We’re at the point where remaining in this state is more harmful than moving elsewhere in the hospital

–The Fed is, to some degree, a political animal.  It doesn’t want to be seen as attempting to influence the presidential election, which would have been a routine action by the Fed a generation ago

–Other than psychologically, it really doesn’t matter to the economy whether the cost of overnight borrowing is 0.25% or 0.50%

–Neither political party has a viable economic policy, in my view.  Leaving rates at zero prolongs the Fed’s role in enabling dysfunction in Washington (which seems to me to be the key issue in the election, whether ordinary citizens are articulating this or not).

 

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