Friday, March 20, 2015

Why Those Who Say the Fed Will Not Raise Interest Rates are Wrong

I discuss this in today's EPJ Daily Alert:
I continue to see a number of economic commentators promote the idea that the Federal Reserve is not going to raise interest rates. The impression given by some is that the Fed is in a trap and that they are never, ever going to raise rates.
I strongly disagree with this perspective. I believe it is based on a misunderstanding of current Federal Reserve thinking, but more importantly it fails to take into consideration market forces which could push the Fed to raise rates, even if they don't start to raise rates on their own sooner.
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1 comment:

  1. I'd like your thoughts on the above, in light of Gary North's comments on the matter ( In sum, the only rate that the Fed can do anything about directly is the FedFunds rate and to increase that is to greatly decrease the amount of "profits" being sent to the Treasury to help cover the budget deficits. And also, that a rate increase will attract even more excess reserves that the Fed will have to pay interest on as well. Thanks Bob.