As everyone now knows, the Fed (the Federal Reserve Open Market Committee) announced today that it was raising interest-rates (technically, the range of the Federal Funds rate, which is the rate at which depository institutions—banks and credit unions—actively trade balances held at the Federal Reserve, called federal funds, with each other, usually overnight, on an uncollateralized basis).
As I see it (and as I explained to a friend and colleague the other day), the Fed raised rates today because it’s been saying for months it was going to raise rates and not to raise rates would have meant casting doubt on the current recovery and the overall health of the economy, thereby upsetting expectations. So, it did what was expected and, as a result, not much will happen—either for the tiny minority that has benefited from the nature of the economy recovery or for the vast majority that has not.
But today’s decision does remind me of my first day on the job, at my first teaching appointment (and while I was still working on my dissertation proposal), when one of my new colleagues invited me into her office and greeted me by asking, “So, what do you think is going to happen with interest-rates next year.”
Really?! I had no idea nor, truth be told, did I have much interest in the issue. But it was at that point I realized I was an economist. Or, perhaps more accurately, of how I was being interpellated as an economist.
Economists, according to my colleague, are supposed to have an opinion about interest-rates. Me, I was—and remain—much more interested in other rates, such as the rate of exploitation.