Fed is set to raise rates this week despite political tumult – The Denver Post

WASHINGTON — The Washington political world is in disarray. Britain’s election tumult has scrambled the outlook for Europe. And economies in the United States and abroad are plodding along at a pace that hardly suggests robust health.

Yet when the Federal Reserve meets Wednesday, it’s all but sure to raise its benchmark interest rate for the third time in six months — a pace the Fed would normally adopt when it’s trying to slow an economy at risk of overheating.
So why the rush to keep raising rates?

Even with the economy growing sluggishly, the barometers the Fed studies most closely have given it the confidence to keep gradually lifting still-low borrowing rates toward their historic norms.

Though the Fed monitors the overall economy, its mandates are to maximize employment and stabilize prices. And hiring in the United States remains solid if slowing, with employment at a 16-year-low of 4.3 percent — even below the level the Fed associates with full employment.

Inflation has been more problematic, having long stayed below the central bank’s 2 percent target rate. But Fed officials have said they think inflation, which has recently slowed further, will soon pick up along with the economy.

That said, no one expects the Fed to turn aggressive. If nothing else, the political fights and uncertainty in Washington — over investigations into Russia’s ties to President Donald Trump’s campaign, health care legislation, tax cut proposals and about whether Congress will raise the nation’s borrowing limit and pass a new budget — could lead the Fed to raise rates more slowly than it otherwise would.

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