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**JANUARY 7, 2022**
Kuttner on TAP
Has the Federal Reserve Heard of Omicron?
Raising rates when the economy is on the brink of a second pandemic
recession would be lunacy.
On Wednesday, the minutes of the mid-December meeting of the Federal
Reserve's policy-setting Federal Open Market Committee (FOMC) were
made public. They reveal that the Fed is likely to raise interest rates
in March. The disclosure sent financial markets tumbling.
You wonder if these people have heard of COVID. With cases spiking and
portions of the economy shutting down as workers get sick, we are on the
verge of a double-dip COVID recession.
An interest rate hike in March would be the coup de grâce. If anything,
the economy will need more stimulus, both low rates and extended
unemployment compensation benefits, not to mention Build Back Better.
Is the Fed reverting to type, now that Jay Powell is safely ensconced as
chair for another four years? Yes, but it's more complicated.
That meeting of the FOMC was more than three weeks ago. The minutes
show that Fed staff economists were predicting accelerating economic
growth, pre-surge: "The information available at the time of the
December 14-15 meeting suggested that U.S. real GDP growth was picking
up in the fourth quarter after having slowed in the third quarter."
Officials, mainly, were misdiagnosing inflation as reflecting that
growth rather than supply bottlenecks. But in mid-December, the economic
impact of the still-building omicron surge was not yet on the Fed's
radar screen.
It damned well better be now.
The just-released jobs report
for December, showing only 199,000 new jobs, reflects a marked
deceleration of growth, and the reference period for that report
predates the worst of the omicron spike. January's is likely to be
even worse.
Speaking of the Fed reverting to type, the Fed's departing vice chair,
Richard Clarida, has just amended his disclosure forms to show that his
stock-trading, evidently based on privileged information, was far more
serious than he initially disclosed. Clarida came under criticism when
he first revealed that he had purchased shares in a stock fund on
February 27, 2020, one day before Fed Chair Powell stated that the
central bank was ready to cut rates to help the economy in the pandemic.
That statement sent stocks soaring. Other top Fed officials had surely
been consulted and knew it was coming, since the Fed operates by
consensus.
Clarida and the Fed initially claimed that his stock purchase was just a
long-planned, routine portfolio "rebalancing." The suspicious timing was
supposedly just a coincidence.
Now Clarida admits
that three days earlier, as stocks were plunging, he sold shares in the
same stock fund, only to buy them back on the eve of Powell's
statement. The trades
totaled between $1 million and $5 million.
What a lucky accident for Clarida! This insider trading on privileged
information cries out for a criminal investigation
by the Justice Department and the SEC. It's part of the Fed's own
pandemic of corruption.
****
~ ROBERT KUTTNER
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**Robert Kuttner's latest book is**
The Stakes: 2020 and the Survival of American Democracy
.
[link removed]
In Opposing Student Debt Relief, Susan Rice Breaks With Her Family
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As head of Biden's Domestic Policy Council, Rice has resisted
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Four Republicans with extensive ties to the pharmaceutical industry
plan to support Robert Califf's Senate confirmation. BY DONALD SHAW
Altercation: Mailering It In
The
canceling of Norman Mailer is greatly exaggerated. BY ERIC ALTERMAN
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