The Fed's Vice Chair has suggested that central banks are moving off of the zero interest rate policy. This is because the Fed has met their employment rate quotas. This is expected to keep Asian imported commodities low because of the struggling Asian economies.
There is, however, concern about inflation and global economic risks and what raising the rates would do to world economies. The Vice Chair Fischer says he is not concerned about these issues and raising the rates in the next month or so should be expected.
What do you think, will this harm world economy lenders like the Asian countries or is this a move that will help drive our economy to the 3% expected growth?
4 comments:
I think that the interest rate rise will not hurt our economy. As discussed in the Economic Outlook Conference, our highest growth is expected within the next two years. Another thing to remember is that they will raise the interest rate slowly, and when they raise it, it will still be historically low. I think we will still hit our expected 3% growth rate, even if interest rates rise.
I agree with the opinion that even though the Fed is moving towards higher interest rates the US economy will be able to reach an output growth of 3%. In turn higher interest rates should not have a negative impact on the economy.
Finally more concrete decisions are being made. I am sick of the Fed moving back and forth about the rate hike with vague press releases. Their rumors have caused enough harm for the stock markets in the past couple months. If rates go up I wouldn't expect this to drastically hurt our Asian lenders, because we are paying them back on their interest rate. This should increase FDI, which would stimulate our economy and increase our growth. It should also strengthen the dollar quite substantially.
With a solid decreasing unemployment, increased salaries, and increased number of workers hired, the economy definitely seems ready to face a gradual hike in interest rates. As long as the increase in rates is done incrementally in order to give time for the markets to react, the change in rates will be good for our growing economy. Also in terms of inflation, although we are not at the target rate of 2%, there are predictions that we will be able to get there in the next couple of years, as we increase energy and import prices. Overall, I believe that the interest rate hike will be a positive step for the economy and help us move forward.
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