Sorry, this works FOR Trump, who in the campaign warned against a recession, and now the Fed is saying, “Hey, the economy is good. We’re gonna raise rates cuz it’s about to explode.”
Trump wins this.
But...that’s not why Yellen is doing this. I heard Morici claim Yellen was politically motivated.
That said, it is possible to kill the economy with rate increases brought too fast, too often.
The forecast after the increase from one commentator was for a .9 GDP, downgraded from over 3% just 2 months ago.
There is no evidence of run-away inflation. 30 year mortgage rose to 4.2% on the announcement, and we both know, because of our age, that a 7% mortgage is an impediment to the contruction/housing industry in that monthly mortgages should be no more than 25% of gross income as a rule of thumb. It prices out the new middle class with avg income of 50,000 a year. 25% is 12,500 or the ability to spend no more than about 1100 a month on a mortgage. We’re talking about a $150,000 mortgage as the upper range of affordability.
Great, plus it keeps inflation down, or even reverses it a bit.
I hate inflation. Inflation is entropy.
The price of food nearly doubled during Obama.
I agree. The super low rates were a reflection of a struggling economy, in which you try to stimulate spending (by making money easier to borrow). When rates rise, it encourages more savings and investment.
I think that between the rise in stocks and the interest rates on fixed income investments, many baby boomers that were holding off on retirement will now exit the job market.
This will make room for more jobs and increased inflation.