With the inflation numbers for October in, many Economists around the country have come to a consensus that the Fed will raise the interest rate come their December meeting in the mid-part of the month. For some this comes prematurely as interest rates usually rise at the beginning of the year but is in contradiction with another trend. As we are about to enter a presidential election recent trends show a drop in the interest rate to help secure confidence in the Federal Government and help support the next POTUS in continuing economic growth. Now for the Average Joe, who does not have much of an ECON 2301 background, why does the Fed increase the interest rate? The Fed increases the interest rate to combat the inflation of the US dollar. The theory is a higher interest rate leads to people paying more monthly leading to a decrease of money in circulation and overall leading to a lower inflation rate. Some economists feel raising the interest rate now during a healing economy will only hurt the economy in the short run leading to a decrease in consumption and hurt the housing market discouraging homebuyer’s to signing off on a mortgage. Depending on how you look at the world of Economics the rise in interest rate is either good or bad. The point of the Fed raising or lowering the interest rate is to bring balance to the economy. In America, we always play a balancing game of what interest rate is the best to use during a time of a certain unemployment or inflation rate. This raise interest rate will affect the housing market in some way, but many believe this change will take 12-18 months until we can actually gauge whether the effects of this are positive or negative.
Interest Rate to Rise in December!
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