For over a year, the Federal Reserve has said it planned to raise its benchmark interest rate — the one that’s currently near zero, and whose level ripples through interest rates across the economy — around the time that the nation’s unemployment rate hit 6.5 percent, so long as inflation wasn’t getting out of hand.
When Fed officials made that pledge in December 2012, unemployment was 7.9 percent. Now, as the jobless rate inches closer to the 6.5 percent threshold, the Fed is rethinking its stance, minutes from the central bank’s latest policy-setting meeting revealed Wednesday.
“Participants agreed that, with the unemployment rate approaching 6-1/2 percent, it would soon be appropriate for the Committee to change its forward guidance in order to provide information about its decisions regarding the federal funds rate after that threshold was crossed,” said the minutes from the late-January meeting, released after the customary three-week lag. Last month, the Bureau of Labor Statistics said the jobless rate was 6.6 percent.
Fed officials don’t know what their new guidance will look like yet. Some of the Fed’s 10 voting policy-committee members thought it should be changed quantitatively; others thought a more flexible qualitative approach should be adopted. Several thought financial stability should join the unemployment and inflation measures that are intended to help the Fed convey to markets and Americans when they can expect rates to rise.
The Fed’s talk of changing its guidance dovetails with two broader economic discussions taking place. Although it has been falling, the U.S. unemployment rate is no longer seen as a great window into the health of the labor market. Part of its rapid decline, from 7.2 percent in October to 6.6 percent in January, was due to people dropping out of the labor force. Some were doing so for the “right” reasons — i.e., baby boomers retiring — and others for the “wrong” reasons — i.e., those becoming discouraged with the labor-force situation and dropping out. It’s tough to use the shorthand of the headline rate to convey that distinction. The persistent problems of long-term unemployment and underemployment are also not captured by the BLS’s primary jobless rate.
Fed policymakers grappled with another key question in late January: how much the downward trend in labor-force participation is due to structural factors, like demographics, and how much is due to cyclical factors, like the weak recovery. “The extent of the cyclical portion of the decline was viewed by some as difficult to gauge at present,” the minutes said.
The January meeting was Ben Bernanke’s last as Fed chair; when the Fed policymakers next convene, on March 18-19, Janet Yellen will be leading the board.
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With three days until the first debate, the polls are coming fast and furious. The latest round:
- An Associated Press/Gfk poll of registered voters found very few voters committed, with Clinton leading Trump, 37% to 29%, and Gary Johnson at 7%.
- A McClatchy-Marist poll gave Clinton a six-point edge, 45% to 39%, in a four-way ballot test. Johnson pulls 10% support, with Jill Stein at 4%.
- Rasmussen, which has drawn criticism for continually showing Donald Trump doing much better than he does in other polls, is at it again. A new survey gives Trump a five-point lead, 44%-39%.
In contrast to Hillary Clinton's meticulous debate practice sessions, Donald Trump "is largely shunning traditional debate preparations, but has been watching video of…Clinton’s best and worst debate moments, looking for her vulnerabilities.” Trump “has paid only cursory attention to briefing materials. He has refused to use lecterns in mock debate sessions despite the urging of his advisers. He prefers spitballing ideas with his team rather than honing them into crisp, two-minute answers.”
Donald Trump "is on the precipice of becoming the only major-party presidential candidate this century not to reach out to millions of American voters whose dominant, first or just preferred language is Spanish. Trump has not only failed to buy any Spanish-language television or radio ads, he so far has avoided even offering a translation of his website into Spanish, breaking with two decades of bipartisan tradition."
Bill and Hillary Clinton have purchased the home next door to their primary residence in tony Chappaqua, New York, for $1.16 million. "By purchasing the new home, the Clinton's now own the entire cul-de-sac at the end of the road in the leafy New York suburb. The purchase makes it easier for the United States Secret Service to protect the former president and possible future commander in chief."