Connect with us

Hi, what are you looking for?

The American GeniusThe American Genius

Business Finance

With the economy heading black expect hiked rates

(FINANCE NEWS) While economists predict that there will be a healthy return of inflation, newer hiked rates may make you feel a little sick.

economy hike rates

On Sunday, Janet Yellen, the Federal Reserve chair, remarked on the state of the economy and the federal interest rates during a speaking engagement at an international banking seminar. All signs look good going into the end of the year, which is a good sign that an interest rate hike is on the way.

It’s been reported that Yellen did acknowledge that this year’s hurricane season has slowed growth slightly, but the effects would be more than offset by a “rebound” likely coming before the end of 2017.

Overall, “economic activity in the United States has been growing moderately so far this year, and the labor market has continued to strengthen,” Yellen said.

Yellen also remarked that “the persistence of undesirably low inflation” has been surprising, although she doesn’t expect it to continue, as reported by CNN Money.

Advertisement. Scroll to continue reading.

Before all this, the central bank’s decided to leave their short-term interest rates unchanged while also reducing the number of bonds in its portfolio. That move to let its balance sheet gradually shrink could eventually mean higher rates on mortgages and other loans over time.

The officials will convene again in December, which is when we are likely to see an interest rate increase.

Theoretically, an interest rate increase will moderate economic growth. By making it more expensive to borrow money, folks are less likely to borrow at all, and if they do, they may borrow less to account for the increased interest payments.

In the real estate world, that may also impact property valuations, which can be inflated when it is cheap to borrow money. From a stock market standpoint, the psychology of people spending less money may deflate prices as well. While that may sound bad, if the stock market is indeed overvalued, a deflation will reduce risk associated with a market correction.

There are some situational factors are play here. For example, a second rate hike looming may spurn a lot of short-term investing activity, because people will feel like it will only get more expensive to get into the game. Additionally, since the rate increases are small and are increasingly from an unusually low rate, the impacts may not be as noticeable.

Advertisement. Scroll to continue reading.

Written By

Born in Boston and raised in California, Connor arrived in Texas for college and was (lovingly) ensnared by southern hospitality and copious helpings of queso. As an SEO professional, he lives and breathes online marketing and its impact on businesses. His loves include disc-related sports, a pint of a top-notch craft beer, historical non-fiction novels, and Austin's live music scene.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Advertisement

The
American Genius
news neatly in your inbox

Subscribe to our mailing list for news sent straight to your email inbox.

Advertisement

KEEP READING!

Business News

We all know and love the company NASA for their space exploration efforts, but how much of an economic impact do they have? Turns...

Business Finance

Another large spike in the consumer price index isn't good news for the economy, and the context of the data is more complicated this...

Business Finance

With a second consecutive quarter of declining GDP data, we are officially in a recession - are we?

Business Finance

(FINANCE) Many choose to freelance in order to escape the daily grind of working for an hourly wage. Why, then, should a freelancer charge...

The American Genius is a strong news voice in the entrepreneur and tech world, offering meaningful, concise insight into emerging technologies, the digital economy, best practices, and a shifting business culture. We refuse to publish fluff, and our readers rely on us for inspiring action. Copyright © 2005-2022, The American Genius, LLC.