The support for the increase of US interest rates certainly gained strength since the last meeting of the Federal Reserve said Jerome Powell, who is a manager at the US Central bank. In his words, the patience of Fed regarding the raising interest rates, already paid dividends. However, the banker warned that too slow tightening of monetary policy may lead the Commission open market operations to dramatically raise rates in order to avoid too exceeding the macroeconomic goals.
“The data show that the economy is growing at a healthy pace, a steady increase of employment and inflation, which gradually moves towards 2%”, said Jerome Powell. “The US economy is reasonably close to achieving full employment and 2% inflation,. But the economy still faces a challenge in the medium and long term”, added the central banker.
However, he argued that aging population means slower growth if all other factors remain the same. If the standard of living continue to rise, then the Federal Reserve needs policies to support labor productivity and enable our dynamic economy to generate broader growth in prosperity.
The main concern of the bankers is that the United States debt, which is currently 250 percent of GDP, will be subject to higher interest expense if rates rise, which may cause an increase in inflation. However, over the past seven years, USA had a better market than the economy. So the analysts consider that the economy should be better over the next few years than it was over the past couple of years. Yet the long-term effects of raising interest rates and of Trump’s proposed policies are worth.
The Federal Reserve left the target range for its federal funds rate unchanged at 0.25% to 0.5% for the seventh time during its November 2016 meeting, saying the labor market has continued to strengthen and growth of economic activity has picked up.
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