POWELL FED's interest rate increases - On for September but maybe not December

Yesterday the FED signaled that they would raise interest rates again in September. According to some of the other Steemarians around here they think the FED won't follow through on it's September promise.

Personally, I think that's ridiculous. They would stop a long held tradition of giving the market time to react to the interest rate increases/decreases. Further it would only erode the market's trust in the central banks and governmental powers controlling our system. And in addition, it might make Powell seem as though he's bowing to the will of the president which threatens their independence. And in my opinion, a FED who bows to political pressures is a very scary thing.

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The traditional view is that inflation and unemployment are linked - admittedly not super well anymore but there has been a relationship. That could mean, in the future, a non-independent central bank would be subject to a inflationary bias in their policy leanings. As, lets face it, most politicians are short-sighted and only care about reelection, not the long term good of the economy. "Stable prices are nice, but not at the high cost of unemployment and the politicians job, right? Right!" Or so the argument goes.

Besides, the FED has shown they are typically more afraid of high inflation rates rather than high unemployment. And the FED only has tools to fight one or the other at a time. So No, I don't think the FED will reverse their stated position on the September interest rate hikes.

However, the December rate hikes I think are pretty uneasy. If Trump's trade war with China continues to develop and begins to negatively harm the US economy - as it will. I could see Powell choosing not to raise interest rates at all in December. Further, if we look at nation wide credit score, loans, and debt. We are seeing three things. The banks are loaning to people with lower credit scores, the loans are becoming bigger, and the amount of debt people are taking on is increasing. And with a potential crisis looming in the background with student loans, it puts the economy in a precarious position.

However, baring all of this the economy is still looking strong. We have modest inflation, but not outside the FED's target area, we have some shortages of transport drivers increasing wage growth. Further, we have strong consumer spending, strong productivity, and a strong labor market baring the few shortages. The only thing, in the foreseeable future impacting the US economy is possibly student loans and the trade war.