Most economists are delighted when their prediction comes true.  While I predicted the Fed would not raise interest rates this year, I was secretly hoping they would – not because inflation was out of control, not because unemployment was too high – but because it would reduce uncertainty and be good for the stock market.

The Fed should be above politics.  Instead, they have become a political football, with much of the Republican party indignant that the Fed even exists.  Democrats are not defending the Fed, meaning the Fed has no defenders.  Raising interest rates by a quarter of a point would not damage the economy in any meaningful way.  Yes, the dollar will rise, hurting our exports.  Yes, it would slow our GDP growth a small amount and world GDP growth more.  But, it would take the heat off the Fed and help preserve an important U.S. economic instrument.

Some cynics suspect the Fed “punted” just before Congress must deal with the budget, as a reminder that fiscal policy is more important than monetary policy.  Congress is too constipated to do the right thing, meaning we have no fiscal policy.  Apparently, the Fed is also too constipated, meaning we have no monetary policy.

Looking at the futures market this morning, it looks like the stock market also wanted an increase, as it appears the Dow will drop about 200 points at the open.  With a rate increase already priced into the stock market, the Fed missed a perfect opportunity to raise the rate.

Other critics of the Fed are complaining that the Fed actually paid attention to the rest of the world, alleging the Fed’s two mandates are to reduce both unemployment and inflation in this country.  The Fed has no responsibility for the rest of the world.  However, the rest of the world affects our economy.  Those critics have apparently never heard of globalization.

No change to my prediction – the Fed will not raise rates until next year.