The statement of the Federal Open Market Committee today, “explaining” its decision to raise the Federal Funds rate by 0.75% both today and again at its July meeting, began with a clear falsehood – deliberate lie, or do they not know what their own economists are measuring? The statement began: “Overall economic activity appears to have picked up after edging down in the first quarter.”
On the same day, the Atlanta Federal Reserve Bank reduced its running estimate of second-quarter U.S. economic growth from 0.9% most recently, to zero. Why? It said “the nowcasts [you should excuse the Newspeak] of second quarter real personal consumption expenditure growth, real growth, private domestic investment growth, and real government spending growth decreased from 3.7% to 2.6%, from −8.5% to −9.2%, and [from] 1.3% to 0.9% respectively.” Note in particular the second factor: Business capital investment, already strongly negative and dragging the GDP track down, is becoming more negative as the Atlanta Fed staff tracks it. The FOMC’s rate increases will decrease it further. It said it aims to have the Fed Funds rate at 4% by 2023.
