The Denver-area economy has enjoyed one of the strongest rebounds from the recession, even amounting to a 3.1% unemployment rate in October. However, with the looming rise in interest rates, many local businesses are worried. They're concerned that people won't be able to spend their extra income on these newly formed businesses.
Along with a rapidly growing economy, housing prices have climbed 24% above what they were before the recession. Some say that modestly higher interest rates won't slow the growth, however, others think it definitely will. People think the economy isn't strong enough to handle the possible higher rates.
I do wonder if similarly sized cities are worried about this as well. Also, if interest rates are raised, it would be harder to sell houses and property. Will rates actually affect the incredible expansion of this city? Or are these worries not necessary?
http://www.nytimes.com/2015/12/14/business/economy/in-denver-worries-that-the-fed-will-chill-a-sizzling-recovery.html?ref=business&_r=0
4 comments:
I think this is a very interesting discussion because what most people think about Colorado is the legalization of marijuana. It seems like there has been a lot of migration to this state to participate in this new industry but how has it affected the state on an economic and structural level? It is interesting that the price of housing has risen 24% but makes complete sense. If anything, I think that the housing prices will continue to increase which could affect a lot of native Coloradans who have lived there their whole life. Many will not be able to continue to afford where they live. If I lived in Colorado, this would definitely be a concern for me!
I think the interest rate should not rise until next year though. People have more extra money at the end of the year, if interest rates increase now, then they will not spend as much.
Honestly the Fed has no choice but to raise interest rates. They are so low that if another economic shock were to happen, they would have no tools with which to fight it. People have become too accustomed to these absurdly low interest rates and they need to be raised.
Yes there is reason to worry. Today, for the first time in a decade the FED has raised interest rates. Though unemployment is projected to still remain low, the FED must pay attention to inflation. If they have interest rates high for too long inflation could get out of hand.
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