Senior Fed officials, including Chair Janet Yellen, were surprisingly specific Friday in talking about a boost in interest rates when the Federal Reserve Board's Open Market Committee meets later this month.
Several times in recent weeks, readers of this blog have seen predictions of a rate hike to come soon. Now, speeches by Fed leaders have led with talk about the need to draw back on the program of low interest rates to stimulate the nation's economy.
Now that the economy has been on a slow but steady growth path, as measured by Growth Domestic Product (GDP), it's time for the Fed to pull back from its low interest rate strategy and tap on the economic brakes to prevent a rapid growth rate rise that could lead to a quick fall.
The Fed has been focusing on a growth rate of about 2 percent. For the past two fiscal quarters, GDP has been growing at 1.9 percent, accompanied by labor shortages as companies hire more people. Moreover, the unemployment rate has been below 5 percent for some time now, another indicator of a healthy economy.
The Fed's Open Market Committee is scheduled to meet March 14-15, when it will decide on a change in its interest rate policy. Its key rate, the federal funds rate, has been below 1 percent for many months as the Fed has tried to encourage borrowing to rescue the economy from the Great Recession of ten years ago.
Raising interest rates now will put the Fed on a collision course with the president, who has talked of a surge in economic growth of as much as 3 percent, powered by lower taxes, fewer government regulations and increased federal spending.
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