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Why the federal reserve to raise interest rates will eventually benefit the economy

By Chris Miller,2015-11-13 19:32
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Why the federal reserve to raise interest rates will eventually benefit the economy

    Why the federal reserve to raise interest rates will

    eventually benefit the economy

    Over the past few years, stumblingThe United StatesEconomic "hospital", the federal reserve launched three rounds of quantitative easing (QE) policy and keep interest rates close to zero.And as the U.S. economic recovery, the fed's exit after QE but has been reluctant to open the "single discharge" :Increases in interest rates.This means well, but it may backfire.

    Last week, the federal open market committee (FOMC) meeting decision, will be the key interest rate unchanged at 0-0.25%.Analysts believe that the fed to "care" too much of the U.S. economy, slow action on decision, actually hurt investors and business confidence, interest rates will further promote the economic recovery.

    Raising interest rates for the American economy

    Generally speaking, the central bank to raise interest rates is to prevent overheating, and rising inflation.For the current U.S. economy, few believe that signs of overheating in the economy, and American inflation continued under the fed's target.According to these factors to consider, the federal reserve did not need to raise interest rates.

    But the U.S. economic recovery recovery has been recognized by the market, the U.S. unemployment rate dropped to 5.1% in August seven year lows, achieve the fed thinks the level of full employment.In this case the continued low interest rates close to zero, will lead to consumers and business executives remain cautious about the economic recovery from the psychological view, leading to consumer demand is restrained.

    Jpmorgan chief global strategist David Kelly wrote in the report is sent to client, "by keeping interest rates low, I think the fed will continue to cause stress to the demand and economic growth."

    Kelly thinks, although interest rates generally will put pressure on demand growth, but there is evidence that from extremely low interest rates, based on the original interest rates several times, in fact, can promote the increase in demand.

    The stock market was disappointed for not raising interest rates

    Even as low interest rates are the beneficiary of the stock market, the fed's decision not to raise interest rates seem to be disappointed.

    Wall Street stories previously mentioned, the FOMC meeting after the announcement,U.S. stocksRapid decline after the rebound.The s&p 500 indexThe day closed down 0.25%, at 1990.25.The dow Jones industrial averageClosed down 0.38%, at 16677.01.onlyThe nasdaq composite indexEdged up 0.10%, to 4893.95.

    Merrill lynch, bank of America said in a report released on Monday, the fed to keep rates steady, in fact, bearish market, the stock market returns after every time

    the fed policy stimulus is falling.Investment advisory firm Yardeni Research President he also said that the federal reserve to market some overblown, markets have been ready to raise interest rates, the fed was supposed to take action.

    Higher interest rates could promote the housing recovery

    For those who want to buy a house, raising interest rates would lead to their end, began to take action.Because interest rates will remind them that interest rates will not always like now so low.

    The United StatesThe real estateAssociation chief economist Lawrence Yun said, with the steady growth of obtain employment, potential buyers can afford the mortgage interest rate rise gradually.

    Higher interest rates to increase on monetary policy tools

    Knowledge after Wall Street also mentioned that the U.S. economy has continued to grow for several years, risks building in the world economy, the policy makers also worry that the domestic economic recession.But compared with the economic crisis, the United States more worried about is, in the face of the next economic battle, will suddenly find themselves already out of ammunition.

    A "the news agency," said the Wall Street journalreporter Jon Hilsenrath said, don't think the U.S. economy soon will usher in a recession, but the recent departure of the congressional budget office director Douglas Elmendorf, said policymakers have to cope with the economic crisis of the backup plan ready to a further response.

    While increases in interest rates is to allow the fed to increase the future a good means of monetary policy tools available.

    He says good economic situation in time for normalizing interest rates is a wise choice, because the economy is bad day will come.

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