The best of all worlds
Projections of its officials put unemployment at or below its long-run “natural” rate a year from now. This is not an economy in need of zero interest rates. And, as officials had broadly hinted beforehand, they did start to prepare the way for rates to rise from zero where they have been since 2008. The statement no longer contained the two-year old pledge to keep rates near zero “for a considerable time.” Yet in dropping the statement the Fed went to great pains to reassure that rate increases were not imminent. “Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy,” it said. It went on to say this implied no change in policy from the previous “considerable time.” Janet Yellen, the Fed chair, elaborated at a press conference after the meeting: patient meant no increase for a “couple,” i.e.
The road to nowhere near Wigan Pier
IT MUST seem churlish of me to maintain my grim pessimism about the Fed's current course of action, given the steady flow of encouraging data from the American economy. But try as I might, I cannot muster the same Panglossian enthusiasm as my colleague about the way policy is unfolding.
The dark clouds around the silver lining
OVER the past few weeks, debates over British fiscal policy have been conducted under the shadow of George Orwell's "The Road to Wigan Pier", a powerful description of the poverty he found in the north of England in the 1930s. On December 3rd, George Osborne, the chancellor of the exchequer, in his Autumn Statement, announced plans to turn Britain's deficit, which stood at £108 billion ($169 billion) last year, into a surplus of £23 billion by 2020. Because the government does not want to raise taxes to fund these plans, public spending is forecast to fall from 41% of GDP today to just 35% by the end of the decade. That has prompted accusations that the government wants the country to go back to the late-1930s—and the Britain Orwell describes in his cri de coeur against poverty. The Office of Budget Responsibility, Britain's fiscal watchdog, stated that Mr Osborne's plans would force public spending down "below the previous post-war lows reached in 1957-58 and 1999-00 to what would probably be its lowest level in 80 years".