In many areas of the setting of rules, the rules are meant to have nice little boxes for the person or event to click off. At the end of checklist, the person can say this is what we should do, however when there are areas where there is overlap or not fitting into the checklist, what is a policy maker to do?

In an article by Jeanna Smialek of the New York Times News Service, the economy is not acting the way all the experts believe it should and this leads to the Federal Reserve to not to pull levers. The Federal Reserve or Fed controls interest rates and many believe after being 0 for a number of years and a quick rise, rates should be cut. This would give breathing room for the economy and people can adjust to lower rates.

The Fed is determined to slow inflation down and normally raising interest rates has the affect because businesses, which run on credit, has to pay more in interest charges would slow their business or layoff people. Individually it is not good for the person, but for the economy in general it is good thing. If enough business laid off people, then demand would slow and prices fall. The issue is the economy appears to be booming as prices continue to climb more quickly than usual.

Kathy Bostjancic, chief economist at Nationwide, says right now we are not even seeing a soft landing, we are seeing a no landing.

One of the signs is the Consumer Price Index or CPI, it is 3.8% on an annual basis after food and fuel costs are stripped out. The CPI has stayed around 4% for months. The economy can be in a recession, when growth falls and eventually pulls inflation lower. It can be in stagflation, when growth falls but inflation remains high. It can be in a soft landing, with cooling growth and inflation. Or it can experience an inflationary boom, when growth is strong and prices rise quickly.

Fed officials entered 2024 predicting 3 interest rate cuts to lower interest rates to 4.6% from 5.3%. The officials maintained the call into March economic projections.

But inflation and economy overall show staying power and Wall Street analysts expect only 1 or 2 cuts this year. Fed Chair Jerome Powell says he will be patient about cutting rates and Neel Kashkari, the President of the Minneapolis Fed says he sees a possibility of no cuts.

Linking to dividend paying stocks, when interest rates rise, generally companies tend to make less money, they can still make profits but make less money which means investors tend to be more defensive in their stock picking. It is one of the reasons why dividend paying stocks tend to rise in price when investors are more defensive, they care more about making money than growth. In a low interest rate environment, growth is good, when it switches making profits is better. If your investments can make profits in both high and low interest rate environments, all you have to do is monitor them to ensure the reasons why you bought remain solid.

There are more questions than answers, till the next time – to raising questions.