Why Did the Fed Raise Rates?

On Thursday the Federal Reserve raised the interest rate it charges banks on short-term emergency loans—a move that caused overseas stock markets to plummet (the New York exchanges were already closed). “I have no idea why they thought this was a good idea,” Matt Yglesias writes. “There’s a ton of excess capacity still in the United States. The whole world economic is incredibly fragile. Million of Americans are sitting around unable to find jobs. … But the Fed moved to tighter money and the markets are reacting.” The Fed jacked interest rates presumably to tamp down on inflation, but on Friday new data showed that core inflation fell for the first time since 1982.