econ read and the fed

The American economy is proving a bit tricky at the moment. Housing markets continue to strengthen, and the labor market is maintaining its plodding but stable rate of improvement. One wonders to what extent equity prices reflect global, rather than domestic, factors. Markets got a little nervous about recovery in the spring. Markets anticipate faster Fed tightening, but that's mostly because the recovery has sturdier legs. America seems to be getting much more real growth relative to inflation than it did earlier in the recovery.

Alternatively, one could say that markets got nervous about recovery in the spring, became more confident from early May, but have since become very worried about too-rapid Fed tightening. 

Talk of "financial stability concerns" and QE tapering has come even as the global economy has looked shakier. There is no cause, whatsoever, for the Fed to begin tightening. On the contrary, the Fed has every reason to keep the pedal to the metal.

Better American fundamentals should make monetary policy more effective and give the Fed more room to ease, but the Fed instead seems to want to use them as an excuse to tighten. That's not good.

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