There has been a lot of talk recently about The Fed and their impending increase in the interest rate. On Friday, Fed Vice Chairman Fischer said that China's economic slowdown and its effects are delaying the Feds decision to raise the interest rate. The question now becomes how long will they wait.
Some of the members of the Fed are advocating a more lengthy wait, pointing to the fact that what happens internationally has an effect on the US. On the other side, members are recommending that the increase happen as soon as the US reaches 2% inflation.
In my opinion I think the Fed should wait a little longer to see how the China slowdown effects the US. As soon as the effects have been gauged then an increase could potentially happen.
4 comments:
I agree with Bryce, if there is a chance that China's slowdown problems will have a bad effect on the U.S, then the U.S should just wait to increase the interest rate. An example of it hurting people are the investors in Chinese companies. Hopefully the delay is not to long.
An interesting approach I have read claimed that the Fed should hold off based on sensitivity analysis. Essentially, the is a lot more downside to raising rates early than raising them late
But the fact is that, the Fed saying that they will raise interest rates so long ago was to increase consumer spending, which has happened. But them, basically, teasing the US Economy by saying "we are going to raise them..." "we are going to wait it out and see what happens across seas..." To me, I can see that as something that might shake consumer confidence. Our financial leaders and rule makers being nervous that one country's slow down could really shake up our economy isn't very reassuring.
Very interesting conclusion, however; i do agree with the notion that pegging ones own economic behavior on how things pan out in another country can be a slipper phenomenon.
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