Raising The Rates by the Feds: What Does it Mean?

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Raising the Rates by the Feds What Does It All
Mean

• Nathan Carlisle

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Intro
It was in December of 2015 that the Feds
increased interest rates for the first time since
the financial crisis of 2006 and after nine
years of some of the lowest interest rates in
history, the Fed has started the process of
possibly making it a bit more expensive to borrow
money and, perhaps, more beneficial to save.  The
Fed strongly felt that the historically-low
interest rates we have all been enjoying have
encouraged borrowing and increased risk-taking
which has stimulated growth.  It was at the
December meeting where Fed officials highlighted
that any continued raised rates would be
introduced gradually, and only if economic growth
were to show signs of continued strength.
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A Double Edge Sword
The Fed is encouraged by three things, in
particular  1) continued job-growth 2) increased
business and consumer spending and 3) a
more-stimulated housing market.  By the same
token, the Feds noted that domestic economic
growth became somewhat sluggish during the latter
part of 2015 where the economy expanded at an
annual rate of below 1 percent during October,
November and December.  To top it off, equity
markets have plummeted in January 2016,
eliminating wealth and weighing on confidence,
while the dollar shows signs of gaining strength,
reducing the demand for American exports.
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Differences of Opinion
A general feeling concerning the risk that
conditions will actually deteriorate has caused
some financial analysts to believe that the Fed
is not likely to raise rates in March but will
wait until the summer of 2016 or even further
down the road.  Ellen Zentner, chief U.S.
economist with Morgan Stanley, has stated 
Based on the state of the economy today, we
believe the bar has become insurmountable for a
follow-up rate hike in March.  Zentner bases her
feelings on the price of assets being closely
tied to short-term interest rates with the Feds
doing little to change market expectations.   The
other side of coin involves Stanley FischerFed
vice chairman, and William DudleyPresident of
Federal Reserve Bank of New York.  Both feel
market expectations reflect an over abundance of
pessimism, and that investors and analysts are
jumping to premature conclusions.
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• Thank you

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aising-the-rates-by-the-feds-what-does-it-all-mean
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