It Is Interest Rate Hike Day!

For the first time in almost a decade, the Federal Open Markets Committee is likely to raise rates today.  Whole careers have been launched without going through one of these things, so there’s plenty of attention being paid, though I don’t know, maybe instability in the bond market will make them less likely to do it.

That the speculation above is the sort of thing that a lot of people are doing illustrates what an odd creature of administrative law the FOMC is.  It essentially is exempt from most rule of law requirements, although its empowering statutes featured a ton of guidance from Congress about what it should think about when it thinks about the monetary supply.  But its decision about whether to raise or lower the federal funds rate is a matter left entirely to its discretion, and neither the courts, nor Congress, nor the President will have anything to say about it.

There’s lots of good reasons for that – politicized money tends to be very susceptible to inflation.  But one of the reasons to have administrative law is to render decisionmaking predictable, and really, nothing’s more important than predictability when it comes to the monetary supply, where there’s not a good reason, absent terrible economic conditions, to surprise anyone ever. In my view, that’s why the FOMC has adopted rather stable customs in lieu of legal constraints, and I wrote about it here.  Boring meetings, standardized voting, releases of the data on which the decisionmakers relied … not of it is required by law, and yet all of it has been adopted by the agency.