Yellen Punts

There are two explanations, one political, one economic, for the Fed’s decision to leave interest rates alone. The first of course, is that Fed chair Janet Yellen is a political animal, and the forces on her side have been agitating loudly to leave rates alone. History has shown that the Fed finds it easier to raise rates shortly after elections than shortly before them, and with the next one scarcely a year out reverting to a dovish stance is understandable.

But the economic issue that supports the Fed’s inaction is that it has adopted an inflation target of 2 percent, and it’s nowhere near that rate at the moment. In fact, recent measures have shown that it has been receding of late.