We will soon find out if the Federal Reserve will raise interest rates for the first time in nearly a decade or if it will delay it once again until next year. The United States central bank has sent out mixed messages about its intentions this summer, while many on the outside are split over a hike in interest rates.
According to one former White House official, the Fed should raise interest rates next week.
Speaking in an interview with Bloomberg, David Stockman, the former Reagan budget director and bestselling author of “The Great Deformation,” explained that the Fed should begin to increase rates, citing falling unemployment level as part of the Fed-induced boom.
“We are effectively in the end zone, and these clowns are sitting there debating whether or not we can let the rate go above zero,” said Stockman. “What we need is to get a central bank under control that allows Wall Street to discover prices based on supply and demand.”
The Fed has left its key target for the federal funds rate at a record low of zero to 0.25 percent since Dec. 2008. This manipulation of interest rates has, of course, created distortions in the stock market and overall economy.
On Wednesday, the New York Times published an editorial entitled “You Deserve a Raise Today. Interest Rates Don’t,” in which the newspaper urged the Fed to postpone a rate hike. The newspaper alluded to wage stagnation as proof that the U.S. economy isn’t prepared for any movement in interest rates.
“Policy makers should be focused on strategies to raise wages, but the opposite appears to be happening. Just as Congress enfeebled the economy by switching too soon from stimulus spending to budget cuts, Federal Reserve officials have all but vowed to begin raising interest rates this year,” the editorial read.
“That move reflects a belief that the economy is returning to ‘normal,’ but it would be premature, because today’s norm is an economy that is incapable of generating and sustaining broad prosperity.”
Peter Schiff, CEO of Euro Pacific Capital, does want the Fed to normalize rates, but he doesn’t believe the central bank will ultimately do anything to boost interest rates.
“I don’t think they’re really considering it,” Schiff said. “I think they know that if they raise rates, everything is going to collapse and they’re going to have to cut rates back to zero and look like complete fools.”
With tepid economic growth – it’s projected the third-quarter only saw 1.5 percent growth – and other weak economic data, plus the Chinese financial crisis, the Fed may decide to hold off a rate hike until December and possibly into next year.
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