Fed’s Janet Yellen on December Rate Hike
Although the jobs numbers are still soft, the market has been rebounding this past month. As we wrote about before, October was the strongest month for stocks in 4 years. That alone could be enough to cause the Fed to move on a rate hike this December, as Yellen herself hinted at.
One thing that Fed Chair Yellen mentioned was moving in a timely fashion to raise rates -- that is not sticking around at 0% through the rest of the year and then having to raise rates all at once.
When asked directly about when rates will be going up, Yellen replied, "The committee does feel that moving in a timely fashion -- if the data and the outlook justify such a move -- is a prudent thing to do," she said. Many analysts have taken that to mean that a rate hike is looming in December.
The Federal Reserve’s prime interest rate controls how much interest banks have to pay when borrowing from one another. That trickles down to mortgage rates, car loans, savings account yields, and ultimately impacts inflation itself. The Fed is currently keeping inflation low to help jumpstart the economy, but it may allow some more into the system as it raises rates.
A bit of inflation is good, since it tends to raise wages and prices, but too much can be a bad thing. The Fed is tasked with keeping inflation under control among other things. Their monetary policy is one of the cornerstones of the US economy, and by and large they do a good job at controlling interest rates and inflation.
Of course, the Fed has held the prime rate at 0% since this latest economic downturn in 2008. That’s a record low for the Fed, and they’ve acted to keep the economy from locking up due to insufficient capital flow at the highest levels.
Published on Nov 4, 2015By Aaron Phillips