Fed chair Janet Yellen has again hinted at an interest rate hike, saying it's a real possibility in the month of December. She believes that, barring a decline in economic expectations, a rate hike is on the horizon. This caused a slight dip in stocks, as businesses brace for economic contraction. While inflation indicators remain low, a much better than expected October job report signals a possible tipping point in the economy.
People remain polarized on the issue. Many say that near zero interest rates are not sustainable, while others say that an interest rate hike would stall an economy is not ready for any contractionary policy. I personally believe that the rate hike is needed, but december may be too soon. While job reports are promising, peoples consumer confidence is still shaken by the recession. Near zero interest rates are too low to be sustained, but an interest rate hike may need to be saved for a later date.
http://www.nytimes.com/2015/11/05/business/economy/fed-yellen-congress-interest-rates.html?_r=0
2 comments:
It's an interesting question that has been much of the discussion for the last year. No one really knows when it will come. It is continually pushed back for many reasons but I do agree that they need to do it soon. If we do have another crisis we will not have the ability to use any interest rate policy to stimulate the economy and that may not be enough.
Why is it that near-zero interest rates are unsustainable? Wouldn't this inflationary measure lead to an eventual increase in consumer confidence again?
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