Critics noted that economic growth has slowed in the current quarter and that the Fed’s preferred measure of inflation (the rate of increase of the price of consumer expenditures) had fallen below the official 2pc target. Given that the Fed has long said that its interest-rate policy is “data dependent,” why did it press ahead with its previously announced plan to continue tightening monetary conditions? The FOMC statement announcing the latest interest-rate hike gave no explicit reason for it. Fed Chair Jay Powell’s remarks at his press conference also gave no reason for maintaining the originally planned rate increase despite the economic slowdown. Determining the appropriate level of the interest rate depends on balancing a changing array of considerations. So what considerations might the FOMC have had in mind in deciding to raise the rate this month and projecting a higher rate in 2019? There are three possibilities. First, the current level of the real … [Read more...] about Why is the Fed still raising interest rates?
Why raise interest rates
caption Bank of England Governor Mark Carney. source Anthony Devlin/Getty Images; Samantha Lee/Business Insider The Bank of England is set to hike interest rates for just the second time since the financial crisis later on Thursday. Britain’s central bank is expected to raise rates from 0.5% to 0.75%, taking the UK’s base rate of interest to its highest level since March 2009. Markets are pricing a more than 90% chance of a hike butUBS strategist John Wraith says a hike on Thursday is an “unnecessary risk.” LONDON – At lunchtime today, the Bank of England looks set to raise interest rates for just the second time since the financial crisis. If financial market expectations are met, Britain’s central bank should raise rates from 0.5% to 0.75%, taking the UK’s base rate of interest to its highest level since March 2009. Markets are pricing a more than 90% chance of a hike, according to the latest data. The rate … [Read more...] about The Bank of England is ready to raise interest rates today — it could be an ‘unnecessary risk’
The Federal Reserve on Wednesday announced that it raised its benchmark interest rate, as had been widely expected. This will raise borrowing costs for credit cards, auto financing, mortgages, and other loans. In a notable change to its statement, the Fed removed language indicating that it expected the economy to grow at a pace that warrants only “gradual” rate increases. Fed officials expect to raise rates two more times this year for a total of four hikes; in March, they saw three rate hikes. The Federal Reserve on Wednesday announced that it decided to raise interest rates and signaled that it would hike later this year more times than it had expected. In a two-day meeting, the Federal Open Market Committee (FOMC) voted to lift the target range for the federal funds rate by 25 basis points to 1.75%-2%. And in a few hours, several banks will respond by raising their prime … [Read more...] about Fed raises interest rates, expects 2 more hikes this year
caption Fed Chairman Jerome Powell source Mark Wilson/Getty; Samantha Lee/Business Insider The Federal Reserve on Wednesday raised its benchmark interest rate for the sixth time since late-2015. The Fed adjusts the interest rates that banks charge to borrow from one another, which is eventually passed on to consumers. Banks give out money all the time – for a fee. When we borrow and then pay back with interest, it’s how banks make money. The cost of borrowing, known as the interest rate, can make a big difference in which credit card you choose or whether you get one at all. But if your bank wants to make it more expensive to borrow, it’s not as simple as just slapping on a new rate, as a grocer would with milk. It’s something controlled higher up, by the Federal Reserve, America’s central bank. Why does the Fed care about interest rates? In 1977, Congress gave the Fed two main tasks: … [Read more...] about The Fed just raised interest rates — here’s how it happens and why it matters
OTTAWA—The Bank of Canada is already well into the process of raising interest rates to more normal levels and another increase is expected on Wednesday, after the economy’s stellar performance last year.The big questions are how quickly do rates continue moving up from here, how closely will they follow U.S. increases and where will rates settle. Markets are pricing in at least three more increases this year, which would bring the benchmark rate to 1.75 per cent.Canada’s economy, swept up by a synchronized global expansion, a housing boom and recovering oil prices, had a banner 2017 that included a sharp drop in unemployment and output growth that beat expectations. Policy-makers now worry the economy could soon overheat, triggering inflation. Which is why they raised borrowing costs twice last year. Read more: Canada’s jobless rate raises odds of interest rate hike … [Read more...] about With another interest-rate hike expected, household debt looms large