What's The Only Reason The Fed is Raising Rates? Hint: It's Not Employment.

Sometime this fall, the Federal Reserve will begin a new tightening cycle.

Publicly, Federal Reserve officials appear to be confident that the American labor market may be overheating or that inflation may be on the way in.

Is this the case?

In looking at Employment, Industrial Production, Consumer Prices, Capacity Utilization, Retail Sales, and the West Texas Intermediate price of oil, there's no evidence that the Fed should raise rates.

What is the Fed worried about?

Probably, and almost exclusively, it's financial asset price appreciation.

Here's a review.

Employment

A picture of employment growth against the Federal Reserve's target interest rate follows.  Interestingly, in past tightening cycles, employment growth was either accelerating or flat.

That's not the case this time around.  Employment growth is decelerating,...