The Fed announced yesterday in a historic decision to raise the Interest Rate of a margin in between .25% to .50%. This comes almost a decade after the economic crisis that occurred during 2007-2009. The Fed with raising does this in good faith of the economy. While the economy is growing and many analysts predict it’s continued growth the Fed finds itself between a rock and a hard place. The raise in interest rates was done on the notion that the economy is growing but the question arises: “Can the economy take a higher borrowing rate?” This is where the Fed finds itself in a internal fight. While the higher interest rate shows signs of a growing economy and the end of the stimulus package era, to many a raise may actually hurt the economy instead of helping it. For someone who doesn’t have of a 2301 ECON background you might ask “Why does the Fed raise the rate?” The answer is to battle another type of economic downfall ex. inflation. In America there is such thing as good inflation and once we leave our natural rate of inflation is where problems begin to occur. With a higher interest rate, in theory, this leads to less money being in circulation which in turns battles the effect of inflation. So with getting a dose of healthy inflation and showing signs of growth the Fed as decided to take the training wheels off the bike and let the economy ride on it’s own. While we will only see the effects of the raise in business investments and time will only tell how personal and long term home loan mortgages will react.
Federal Reserve Raises Rate With Good Faith
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