http://www.cnbc.com/2015/09/25/us-final-q2-gross-domestic-product-39-vs-37-expected.html
The U.S. economy rose .2% more than expected in the second quarter of the fiscal year. The growth from April-June rose a total of 3.9% and was expected to only grow at 3.7%. The growth was believed to have surged due to increases in consumer spending and the transportation industry.
Consumer spending, which is 2/3 of the U.S. economy grew from 3.1% to 3.6%. Reuters believes this happened because of the cheap gasoline prices and an increase in the housing market.
It seems that the U.S. economy is gaining strength but currently the fed is debating on raising the interest rate to encourage saving which would ultimately effect consumer spending. Do you think with a stable unemployment rate and the current growing economy that the fed should raise the rate? I personally think that with the current economic conditions improving, we should keep the rates the same to continue the encouragement of consumer spending.
3 comments:
I personally think the Fed should begin to raise interest rates. The interest rate has stayed too low for too long. Yes it might dissuade people from spending slightly but the rates need to return to normal levels in case of another economic shock. If there were another shock the Fed would be unable to manipulate the rates any further to stimulate spending. I think this is the best time to do so since consumer spending has been increasing.
I agree with Nate that interest rates need be held constant. China's economy is continually slowing down because of a cut back in production. The Chinese manufacturing index called the Caixin/Markit continues to fall short of forecasts. The Chinese economy is accelerating at shrinking of production, which causes exports to decline, and thus unemployment to rise. Corruption, through the ownership of many state-owned enterprises, is causing an unstable domestic and world economy. If the Federal Reserve raise interest rates this will only worsen the problem because of less savers investing into international infrastructure.
Only if the Chinese economy makes a cyclical recovery, however, maybe the Federal Reserve can carry on with the interest rate hike and spike the economy into a boom.
I would argue that the interest rates need to go up. Rates have been pegged near zero since the midst of the economic recession. The fed dropped rates in order to facilitate consumer spending and revive the economy. I would encourage a rate hike at this point in time. Especially considering the economy growing more than anticipated this quarter. Unemployment is rallying, consumer confidence has returned, go is sustainable. I would encourage a rate hike now as the economy is prepared and can deal with the slight market correction that is anticipated to come along with a rate hike.
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