Fed too afraid to raise interest rates.....

[HawktimusPrime]

Not a good sign when the Fed is too afraid to raise interest rates to the levels that they should already be. Are we sure the world economy is actually good to go? What exactly does delaying the inevitable accomplish?

In what amounted to a tactical retreat, the U.S. central bank said an array of global risks and other factors had convinced it to delay what would have been the first rate hike in nearly a decade.

"Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term," the Fed said in its policy statement following the end of a two-day meeting. It added the risks to the U.S. economy remained nearly balanced but that it was "monitoring developments abroad."

However, the central bank maintained its bias towards a rate hike sometime this year, while lowering its long-term outlook for the economy. Fresh economic projections showed 13 of 17 Fed policymakers still foresee raising rates at least once in 2015, down from 15 at the last meeting in June. Four policymakers now believe rates should not be raised until at least 2016, compared to two who felt that way in June.

 

[cigaretteman]

See the other thread on this topic. There's really no need or reason to raise the rates at this time. Inflation is actually lower than optimal and the slowdown of the Chinese economy is a drag on the recovery.

 

[HawktimusPrime]

See the other thread on this topic. There's really no need or reason to raise the rates at this time. Inflation is actually lower than optimal and the slowdown of the Chinese economy is a drag on the recovery.

There is always a need to raise rates Ciggy. They're too afraid to of what a rate increase will cause. Hence why they have been speaking about raising them, and watching how the markets react for the past month or so.

The Fed knows that the economy is too dependent on next to zero interest rates, and in fact just flat out needs them. This isn't a good sign. Are you ready for QE4?

 

[Pheidippides]

Inflation isn't the only risk of low interest rates. It also creates market distortions which lead to malinvestment and credit bubbles.