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Brownslave688

Brownslave688

You want a toe? I can get you a toe.
Ms.PacMan said:
When the economy is in a recession the Federal Reserve lowers interest rates to juice the economy. Lower interest rates make it easier for businesses to borrow money and expand. Lower interest rates make people want to buy houses and use credit to buy stuff.

The Federal Reserve then slowly starts raising interest rates again so they will have have room to cut rates if they need to in the future. The byproduct of raising interest rates is inflation or a slowing of the economy because people will spend less when money costs more to borrow and the things you buy cost more.

Some inflation is okay and their current target is 2%.

So right now the Fed is slowly raising interest rates until the economy cools off a little and they use inflation (the cost of goods and services) as a guide to tell them when to quit.

The Fed is taking time in between each interest rate hike to make sure that they have a correct gauge on inflation. If they misjudge and raise the interest rates too fast causing inflation to spike then the economy will suffer - people will start tightening their belts, businesses will suffer which causes lay-offs, stocks will drop because business profits are down, etc. and the Fed then lowers interest rates and the cycle repeats.

So right now the Fed needs to keep raising interest rates, without causing too much inflation and hurting the economy.
Click to expand...
The byproduct of raising intrest rates is most certainly not inflation.


If they raise rates too fast it could cause deflation. Rates are raised to make sure inflation doesn't go up too fast.
 
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Brownslave688 said:
The byproduct of raising intrest rates is most certainly not inflation.


If they raise rates too fast it could cause deflation. Rates are raised to make sure inflation doesn't go up too fast.
Click to expand...
9CFF825D-398D-4362-8929-46B22B7A7C01.gif
 
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Brownslave688 said:
Just pointing out her take on how the fed and intrest rates work is off.


Inflation is a byproduct of a booming economy. Labor gets tight so wages go up. Wages go up things cost more causing inflation. Rates are then raised to keep that inflation in check.


The high rates of the 80's were to try and curb inflation.
Click to expand...
I was just messing with you. Inflation is under the 2% Target rate, so they should be in no hurry to raise the interest rate.
 
Brownslave688

Brownslave688

You want a toe? I can get you a toe.
Gumby said:
I was just messing with you. Inflation is under the 2% Target rate, so they should be in no hurry to raise the interest rate.
Click to expand...
Which is scary considering how much money they pumped into the economy. It should be or has a chance to be much higher.
 

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