On September 17, much of the world waited for the Fed to finally raise interest rates after nine years. However, the hike didn't happen, and the labor markets might be to blame. American employers did hire more workers but only about 70% of what was expected. Unemployment is just 5.1% but the participation rate is down as well.
In addition to the underwhelming figures, wage growth has remained virtually flat (likely a key factor in the low inflation figures). More than just publishing these figures, the article provides a cautionary point. Since The Euro zone is not the strongest and is heavily reliant on exports. These exports usually end up in Asia, who growth is slowing sharply.
If America is the only bastion of economic soundness at the moment, do you think the Fed should shift it's focus to include the rest of the world in its policy decisions or maintain a solely domestic focus?
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4 comments:
I definitely think the Fed should stay America-focused. I mean, we can't regulate other countries and their economies, and why should we? We can take their growth, or lack of growth, into account in making fiscal decisions, but our policies shouldn't be completely dependent on foreign markets and their countries.
I also disagree with your point of America being the only bastion of economic soundness. How about Germany? Though their economy and population are smaller than ours, their economy is quite sound. I mean, they've bailed out Greece and are taking in large numbers of migrants. However, things could change.
The low wage rates would more than likely be a larger deterrent to rate hikes than the current unemployment rate. This is because the low wage rates will cause inflation to stay low because there will be minimal consumption and a stagnant amount of money in the economy. I wouldn't say the current unemployment rate is something that would deter the Fed because it is essentially what the Fed considers "full employment". It is more than likely that low wages and other factors such as low oil prices are causing inflation to stay down, which is making the Fed weary about rate hikes.
I think the Fed should consider other countries in their policy decisions. Since one big country like US can influence others, the european countries are affecting the US. Even Asian countries have effects to US economy too. The Fed should make independent decision based on whats happening within the country but it should also see the effects of other countries' policies.
In response to the original post, I am in agreement with Ying and her opinion that the Federal Reserve should consider other countries in their policy decisions. I feel that when considering to raise the interest rates, the Federal Reserve should look only at the overall shape of the U.S. economy, but take into consideration the effects of their actions on other countries economies since the U.S. economy has such a strong effect on the global economy. The U.S. is an economic powerhouse and if other countries are not taken into consideration when determining economic policy, the U.S. could severely hinder the health of the global economy as a whole.
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