Janet Yellen is telling everyone that the Federal Reserves is still going to raise its benchmark interest rate this year. She told people that the Fed hasn't done it yet because the labor market condition were doing better and inflation was expected to follow in the increase. On top of that, she believed that the US growth wasn't good enough to increase the interest rates. The next committee meet at the end of October and the middle of December. There were two other Fed officials that agreed with Yellen to delay the increase in the rates until later this year. They wanted to make sure they had more recent economic data before increasing the interest rates. The decision in September was very close to raising it and is becoming more realistic to happen in the next few months. There were a couple risks for the Fed's forecast that could push liftoff into 2016. Something that Yellen said, which was very important about inflation "To be reasonably confident that inflation will return to 2 percent over the next few years, we need, in turn, to be reasonably confident that we will see continued solid economic growth and further gains in resource utilization, with longer-term inflation expectations remaining near their pre recession level." She believe that the United States economy is stable.
http://www.nytimes.com/2015/09/25/business/janet-yellen-says-fed-is-likely-to-raise-interest-rates-this-year.html?ref=business&_r=0
10 comments:
I think finally increasing the rates this year would be a great move. People now have higher consumer confidence and have been spending a lot in the process of significant recovery of the US economy. Savings need to be encouraged by increasing the rates which will be an incentive for the consumers to save more.
I think raising the interest rates would be a good idea as well. With consumer confidence and spending increasing recently, raising interest rates would make investment more appealing. With more investment this would help to keep the economy moving in the right direction as well as capture consumers who are still skeptical that the economy is improving.
I agree that raising the interest rates in the near future would be a good idea economically. All market participants have been under the impression that interest rates would increase the other week, and thus they set their expectations accordingly. However, the quoted excerpt from Janet Yellen also makes sense. It would be rash for the Federal Reserve to make any hasty decisions when the economy is in good standing, but not completely out of hot water from the recession. Although consumer confidence is high and people seem to be in a spending mode, we need to act systematically so that once the interest rates are raised, there will be only good consequences and nothing that backfires. I am looking forward to seeing the decision of raising the interest rates implemented, and the positive economic effects that will result.
I think it's about time they raised interest rates. Right now the Fed does not have a lot of room to maneuver if another economic disturbance occurs. Raising the interest rates will allow them to lower them in the future if need be.
This comes on the heels of the Fed not raising interest rates in the beginning of last week. I think by the raising of inflation rates, it will show the global economy the US is back to its fighting shape and can be trusted. It also gives wiggle room if rates need to be lowered again, but hopefully that won't be the case.
I think raising interest rates is important for the equity efficiency trade-off. We have been spending a lot of our money on equity as of recently as the economy has been recovering and it is time to save. Savings will help us to increase efficiency in the long run. Although this will inhibit equity in the short term it is worth it for long term growth. Also, since we will probably have another recession in the near future it would be smart to start saving now. Higher interest rates will encourage this. They will also encourage foreign investment, something that will boost our economy.
I think Fed will definitely increase the interest rate some day, but not that soon. Because I think for American economy, Fed prefer the situation that everyone believe Fed will increase the interest rate rather than Fed does increase the interest. When everyone believe that Fed will increase the interest rate soon, American market will be more attractive and then American economy can grow. I said Fed will increase the interest rate some day, because Fed want to prove that they are not liar. If fed does not increase the interest rate eventually, no one will believe them.
I agree with Bryce that the Federal Reserve should raise interest rates before the end of this year due to the fact they have no leeway if an economic disturbance occurs. I also agree with Akram that due to the high consumer confidence in the market, increasing the interest rates would encourage saving rather than spending. I think the question is no longer "will the Federal Reserve raise interest rates?", but rather "when will the Federal Reserve raise interest rates?" And frankly, It is just a matter of time.
I believe that not increasing the interest rate in September was a wise decision, and increasing the interest rate later this year will also be a wise decision. Currently we would like to see the inflation rate higher than it is. Right now it is around 0.2% and target inflation is 2%. We don't want to increase inflation rates too early and create deflation, so waiting until inflation creeps back up to raise interest rates is a good idea.
I don't believe the Fed will raise rates this year. Not only has its credibility been shot as of recently because they can't decide on what to do with rates, but they are waiting on inflation to rise, which I doubt will happen. Employment is basically at what the Fed calls, full employment. So, with that being said we are waiting on inflation to rise. With decreasing oil prices, it doesn't seem like this is going to happen in the next few months. I would bet the rate hike will be in 2016. But then again, no one really knows.
Post a Comment