I need help understanding why the Federal Reserve hasn't raised rates.
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kelly0101
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I guess since this forum is .co.uk, I'm on a British site. I'm studying econ in America and am hoping you can help me with the economic principles behind central banks. I think I read somewhere that the U.S and the U.K are in similar situations on this anyway. So please help me if you can.
The Fed apparently doesn't want to raise interest rates from .25% or something like that. An article I read said that its unwillingness to do this indicates that it is not confident enough in the economy to do so. Why is this? I mean how come this shows little confidence by the Fed and why does it need confidence in the economy before raising rates? I also figured out from reading on the web that it will only raise rates when inflation has picked up because it is basically at 0% right now. Why does it need inflation to raise rates? What would happen if it raised rates when inflation were 0%?
Thanks so, so, so much if you can lend any help to me. It would be truly appreciated.
The Fed apparently doesn't want to raise interest rates from .25% or something like that. An article I read said that its unwillingness to do this indicates that it is not confident enough in the economy to do so. Why is this? I mean how come this shows little confidence by the Fed and why does it need confidence in the economy before raising rates? I also figured out from reading on the web that it will only raise rates when inflation has picked up because it is basically at 0% right now. Why does it need inflation to raise rates? What would happen if it raised rates when inflation were 0%?
Thanks so, so, so much if you can lend any help to me. It would be truly appreciated.
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scrotgrot
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Emerging markets faltered this quarter. They fear recession and autumn is the traditional recession season. Therefore they deferred rate rises again. This consensus has emerged over a number of years due to caution after a pretty catastrophic recession. Most of the economy is highly leveraged with lots of private debt and the recession having been due to people getting mortgages they couldn't really afford. Therefore at all costs they want to keep borrowers in the black - home-owners have been loving life the past 8 years. The last time there were comparable recessions in our economies was during the 1970s stagflation whereafter the consensus emerged that controlling inflation was the most important thing. Keeping rates low helps to do this and they would rather undershoot than overshoot 2% which is held to be the ideal inflation rate.
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Jcmason
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(Original post by kelly0101)
I guess since this forum is .co.uk, I'm on a British site. I'm studying econ in America and am hoping you can help me with the economic principles behind central banks. I think I read somewhere that the U.S and the U.K are in similar situations on this anyway. So please help me if you can.
The Fed apparently doesn't want to raise interest rates from .25% or something like that. An article I read said that its unwillingness to do this indicates that it is not confident enough in the economy to do so. Why is this? I mean how come this shows little confidence by the Fed and why does it need confidence in the economy before raising rates? I also figured out from reading on the web that it will only raise rates when inflation has picked up because it is basically at 0% right now. Why does it need inflation to raise rates? What would happen if it raised rates when inflation were 0%?
Thanks so, so, so much if you can lend any help to me. It would be truly appreciated.
I guess since this forum is .co.uk, I'm on a British site. I'm studying econ in America and am hoping you can help me with the economic principles behind central banks. I think I read somewhere that the U.S and the U.K are in similar situations on this anyway. So please help me if you can.
The Fed apparently doesn't want to raise interest rates from .25% or something like that. An article I read said that its unwillingness to do this indicates that it is not confident enough in the economy to do so. Why is this? I mean how come this shows little confidence by the Fed and why does it need confidence in the economy before raising rates? I also figured out from reading on the web that it will only raise rates when inflation has picked up because it is basically at 0% right now. Why does it need inflation to raise rates? What would happen if it raised rates when inflation were 0%?
Thanks so, so, so much if you can lend any help to me. It would be truly appreciated.
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