lundi 13 avril 2015
Fed rate hike: speed and size matter more than the start
Posted on 14:37 by nice news
Experts and the media have obsessed for months about when the Fed will make its first interest rate hike. Will it be June? September? 2016?
But here's the catch: the liftoff date is just an appetizer. The main course -- the meat of the issue -- is how quickly the Fed raises rates. Will the Fed push rates up several times in the months that follow? Will those increases be small nudges or big jumps?
The speed is arguably more important to the U.S. economy and stock market than when the play starts.
"The pace is much more important than the date of the first rate hike," says Gus Faucher, senior economist at PNC Financial.
Related: Fed rate hike reverse: September now more likely (again)
Slow and steady: Everyone from Wall Street to Washington to Main Street is antsy about this first rate hike because the Fed hasn't increased rates since 2006 -- before "The Big Bang Theory" even started airing.
America's central bank slashed rates to near zero in December 2008 to stimulate the economy. The Fed has kept rates at those historic lows ever since.
Raising rates will impact everyone. If you have a credit card, car loan, private student loan, money in a savings account, stocks, bonds or are looking for a home mortgage, the Fed's policy will impact you.
In March, the Fed signaled it's getting ready to raise rates by removing the key word "patient" from its official statement. Many interpreted this to mean the Fed could start hiking rates as early as June. But a few weeks later, disappointing data on the weak hiring in March caused many to forecast the liftoff won't come until September.
The Fed won't say exactly when it plans to raise rates, but Fed Chair Janet Yellen has emphasized the central bank will move slowly.
"Even after the initial increase in the target funds rate, our policy is likely to remain highly accommodative," Yellen said in March. That's Fed speak for rates will
But here's the catch: the liftoff date is just an appetizer. The main course -- the meat of the issue -- is how quickly the Fed raises rates. Will the Fed push rates up several times in the months that follow? Will those increases be small nudges or big jumps?
The speed is arguably more important to the U.S. economy and stock market than when the play starts.
"The pace is much more important than the date of the first rate hike," says Gus Faucher, senior economist at PNC Financial.
Related: Fed rate hike reverse: September now more likely (again)
Slow and steady: Everyone from Wall Street to Washington to Main Street is antsy about this first rate hike because the Fed hasn't increased rates since 2006 -- before "The Big Bang Theory" even started airing.
America's central bank slashed rates to near zero in December 2008 to stimulate the economy. The Fed has kept rates at those historic lows ever since.
Raising rates will impact everyone. If you have a credit card, car loan, private student loan, money in a savings account, stocks, bonds or are looking for a home mortgage, the Fed's policy will impact you.
In March, the Fed signaled it's getting ready to raise rates by removing the key word "patient" from its official statement. Many interpreted this to mean the Fed could start hiking rates as early as June. But a few weeks later, disappointing data on the weak hiring in March caused many to forecast the liftoff won't come until September.
The Fed won't say exactly when it plans to raise rates, but Fed Chair Janet Yellen has emphasized the central bank will move slowly.
"Even after the initial increase in the target funds rate, our policy is likely to remain highly accommodative," Yellen said in March. That's Fed speak for rates will
Fed rate hike: speed and size matter more than the start
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