By Tom Bradley

I’ve written more about central bankers and interest rates than I ever would have expected (or wanted to). Nonetheless, it’s important because we’re now deep into uncharted waters when it comes to central bankers influencing the economy and markets.

Yesterday, the U.S. Federal Reserve left its key lending rate the same at 0-0.25%. Fed Chair Janet Yellen said a rate hike would be considered, “when it [the Fed] has seen further improvements in the labour market and is reasonably confident that inflation will move back to its 2-per-cent objective over the medium term.”

A couple of weeks ago, the International Monetary Fund (IMF) implored the Fed to not increase rates. In a statement, the IMF said, “The U.S. economy remains below potential, wage and price pressures are expected to remain low, and inflation expectations appear well-anchored. There is a strong case for waiting to raise rates until there are more tangible signs of wage or price inflation than are currently evident.”

What’s so interesting about these statements? We know the rest of the world is pressuring the Fed to not increase rates. And central bankers micro-managing the economy is nothing new. What hit home for me was the “further improvements”, “below potential” and “tangible signs of wage or price inflation” comments. These items are ‘nice-to-haves’ in an economy that’s performing relatively normally. They are ‘wants’ versus ‘needs’. Juxtaposed against these ‘nice-to-haves’ are near-zero interest rates, which are reflective of nothing short of a crisis.

There’s a disconnect here. The central bankers are calling out all the forces, using a lot of ammunition, risking over-stimulating large portions of the economy (autos, housing, art) and mortgaging the future, all for the sake of some ‘nice-to-haves’.

Are you kidding me? If we were talking about interest rates going from 4% to 3½%, I’d get it. But we’re not. The central bankers are wielding their interest rate tool as if it was November 2008 (i.e. crisis mode).

So which is it? Is the economy in a perilous state (in which case someone should inform the stock market), or are central bankers, in pursuing perfection, getting in the way of the natural path of an economic cycle? I tend to think it’s the latter.