America is clearly not in a recession, the government is ramping up spending, corporate profitability is recovering, the stockmarket is booming, and the dollar is extremely weak. Under the circumstances, what would be a typical expectation for central bank interest rates? Let's compare with other countries - the EU has a stagnant sluggish economy in its core countries of France and Germany, along with a strong currency, so its rates are relatively low at 2%. The UK economy did not have a recession and is chugging along nicely, and the Bank of England base rate is 3.75%. Canada's rate is 2.5%. Australia's is 5.25%. New Zealand's is 5%. So what is the Fed doing with an interest rate of 1%? It seems utterly at odds with the news from the economy and the developments in the stockmarket and the dollar. They originally used low rates to stave off what they saw as a risk of a Japan-style deflation. Now that danger has clearly passed a long time ago, why are they sticking with the same policy? It seems somewhat strange to say the least. What goal is the Fed trying to achieve with this low rate, seemingly at odds with conditions? Are they trying to *create* inflation, or an asset price boom, or a weak dollar? If so, then we can predict when rates will start to rise - when either of those three conditions start to get out of hand. And by that time it will be too late to pre-empt the effects - the rate-tightening cycle will have to go much higher than if they turned off the spigot now. Any suggestions as to why the Fed is acting this way?