I reckon I’d raise rates.

If I were the Fed, I mean.

I’d need to check my mortgage documents first and be sure I didn’t misspeak while addressing lawmakers about interior decorating decisions at the Eccles building, lest I should be indicted.

But yeah, assuming my paperwork’s kosher and my public pronouncements on the cost and timeline for renovating federal buildings true and accurate to the best of my knowledge, I’d hike this week.

Because let’s be honest: The idea that the debate on the FOMC right now should be about whether to drop an easing bias versus whether to begin telegraphing an inclination to tighten policy absent evidence inflation’s decelerating, is absurd.

The US economy’s adding nearly 200,000 jobs per month on average, the unemployment rate, at less than 4.3% unrounded, is just barely above headline CPI inflation and real GDP growth’s tracking 3.3% for the current quarter, nearly ~twice the low-end of long run potential.

And yet somehow, we’re clinging to the idea that the real question isn’t whether to raise rates — or at least start talking about raising them — but rather whether it’s appropriate to remove from the policy statement an implicit nod to rate cuts.

The staid among you will pardon the profanity: On what f-cking basis would you cut rates right now, or anytime soon, if you’re the Fed? What’s the data-based argument for that? Let’s face it, there isn’t one.

By contrast, there are several arguments in favor of pivoting to rate hikes, not least of which is the fact that if you have two goals and one of them’s met but the other isn’t, you’re compelled, by definition and in this case by statute, to focus on addressing the one that’s unmet.

Donald Trump says rate hikes are unpatriotic — they “kill success,” as he recently put it. Maybe that’s true (the part about impeding “success,” depending on your definition of “success”), but inflation’s the worst of all economic blights. A bane which, once entrenched, kills everything by undermining faith in the myth upon which all modern economies rest: The myth that fiat money has value.

Most readers are likely aware of this, but one of the Nazis’ schemes to defeat the British in World War II involved flooding the country with counterfeit bank notes. The Germans, more than anybody, knew how destabilizing hyperinflation could be.

I know what some of you are thinking: That’s all true, but where were you when inflation soared under Joe Biden to levels more than double today’s rates in the US? The answer is, “Right here, telling the Fed to raise rates.”

On February 11, 2022, I warned that “Jerome Powell’s inaction [on rates] risks irreparable damage to the Fed.” In that linked article, I made a simple argument: Even if the proximate cause of inflation isn’t easier-than-warranted monetary policy, the Fed had to act unless they wanted to publicly state that under certain conditions, inflation’s beyond their power to curb. Here are some excerpts from that linked article:

It no longer matters whether rate hikes are an effective tool given the nature of price pressures currently bedeviling the world’s largest economy. I don’t think they are. Raising rates isn’t going to fix disrupted supply chains. Or bring workers off the sidelines. Fed officials readily admit as much, but they simultaneously (sometimes in the same breath) insist they’ll do what’s necessary to control inflation using tools they swear are “very powerful,” to borrow the Bank of Japan’s language.

If monetary policy’s impotent in the current environment, the Fed should just say so. If it’s not, they need to act. Persisting stubbornly in [the same] policy bent when every, single data point is conspiring against you, is madness and reflects an almost pathological arrogance.

Inflation in the US [may be a purely] supply-demand problem. But a Fed that stands idly by a fire while insisting loudly that if they wanted to, they could put it out, runs the risk of sowing the seeds for a crisis of confidence in the currency.

Amusingly, that was a controversial position back then, particularly coming from a “liberal” commentator.

(As a quick aside, I put “liberal” in scare quotes not because it’s an inaccurate description of my personal political views, but rather because, however accurate in that narrow context, I define myself far too broadly for my position on the left-right US political continuum to be a useful piece of biographical information. That’s in stark contrast to most Americans who, as I lamented a few months back, “define themselves almost strictly in relational terms to Donald Trump.”)

I was behind the curve in calling for rate hikes in February of 2022, but in my defense, I came around a month prior to the Fed itself. And four months before headline CPI peaked. So, colored though my views most assuredly were (and still are) by domestic politics, I wasn’t totally blind, let alone hamstrung in my capacity to pivot by fealty to a personality cult, as many in the GOP are vis à vis Trump.

Of course, the inflation situation isn’t anywhere near as dire today as it was back then. But as I perused my coverage from early-2022 on Saturday, I was reminded of how many times I cited the real policy rate which, as discussed here last week, is negative again.

“The Fed’s current policy stance is parody,” I chided, in 2022, calling the policy-inflation conjuncture on the eve of the first rate hike “comical.” (The real policy rate at that point was negative 6.5%.)

The figure above shows you the difference between then and now. It’s apples to oranges, and you’ll also immediately note that the real policy rate was negative for years post-GFC, and much more so than it is currently.

However, note what wasn’t happening post-Lehman, pre-COVID: Inflation wasn’t rising. Note also that inflation never reset to pre-COVID / pre-Ukraine levels before it started rising again this year.

Although measures of consumer inflation expectations don’t suggest households’ outlook for price growth is becoming unmoored in America, surveys do show perceptions of personal finances, both current and forward-looking, are deteriorating.

The simple takeaway: Even if Americans don’t expect runaway inflation, they’re nevertheless concerned that price growth with remain elevated enough to erode their real incomes over the near- and medium-term.

That’s a problem if you’re the Fed, and you gotta get ahead of it. Or hell, at least stay abreast of it. I don’t know precisely what that looks like (the case for pulling the trigger on a hike, let alone on hikes, plural, isn’t clear-cut), but I know what it doesn’t look like. It doesn’t look like alluding, even vaguely, to the possibility of near-term rate cuts.

Alas, that’s just what Kevin Warsh will be expected to do — keep the door open to rate cuts — when he performs for an audience of one at next week’s press conference.