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More FED confusion.

A short W.S.J. article on Wednesday has exploded a bombshell in the murkey Washington political economic confrontation between the President and the FED. 

The US Bureau of Economic Analysis (B.E.A.) published its annual revsion to personal income data. This shows pay growth rising by 5% in 2018, and now running at an annualised rate of 6% – almost double the rates adopted by the FED and driving a coach and pair through the argument about reducing interest rates. Personal savings rates are up too – reinforcing the health of the consumer. Far from needing encouragent the economy is doing very well thank you very much.

Deregulation, tax reform and the President’s bully pulpit rhetoric may be working even better than he realises. It may be that Powell’s repeated references to “feeling” concerned were his way of signalling a profound suspicion about the statistics he had to work with.

What is certain – all those involved need to get hold of the right facts, be aware of their inherent uncertainty, share the same play sheet and the same strategic focus. As it is, the US may now be mistakenly goading its economic war horse into an unwanted inflationary gallop that could spell higher interest rates and threaten to bring down the whole debt overhang.

If the BEA is right then we are pursuing precisely the wrong economic strategy.

Have a good day, James