26 December 2014

Paul Krugman: Raising Rates Too Early Could Be Disastrous

The Federal Reserve definitely seems to be gearing up for monetary tightening, even though inflation remains below target. And I agree with Ryan Avent at The Economist: If this happens, it will be a big mistake - just as European Central Bank President Jean-Claude Trichet's decision to raise interest rates in Europe in 2011 was a big mistake, just as the Swedish Riksbank's early rate hike was a mistake, just as Japan's rate hike in 2000 was a mistake.

And you would think that Fed officials would understand that. In fact, I suspect they do, and are somehow letting themselves be bullied into doing the wrong thing anyway. More on that in a minute.

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