For all of August and most of September many people have wondered whether the Fed will raise the interest rate or keep it at a historic low. Many factors were thrown around on both sides for why they should raise it or keep it as is. For one, America’s economy is showing signs of strength, even though the rest of the world is not.
On September 17, after much speculation, the Fed determined to keep the interest rate near zero. This decision came primarily due to the instability in the Chinese and European markets. Chairwoman Yellen stated that slowing economic work and the impact on global markets was the driving choice behind the decision to keep the interest rate at near zero. Speculation had been abounding as to whether the Fed would do a hike raise when they met, and until the debacle that was the Chinese markets in August it all seemed certain that they would raise the interest rates. The fall in the Chinese markets, the devaluation of the Yuan, and the uncertainty that followed gave the fed pause.
Speculation About the Interest Rate
In the week that led up to the decision many people speculated that due to the new volatility within the markets, the Fed would be more hesitant to raise the interest rate. They were right, however only just. The Fed stated they planned to raise the rate before the end of the year. This means it could still raise rates at early as October or in December. Many have argued that this only adds uncertainty to the marketplace.
Adding Uncertainty
Many have wondered that if the reason for no raise in interest is the global market uncertainty and slowdown then how would that be resolved by October or December? Several other members of the Fed have echoed that a raise is set to happen this year, which has created a holding pattern of uncertainty within the markets. If there is economic slowdown that is impacting the growth of the American markets, then the Fed claims they should not raise the interest rate until that effect has subsided. If it is merely temporary and in spite of all of this the American economy is strong, then the Fed should raise rates. What they have done is kick the can down the road.
It is true that the volatility of the world is higher than usual and the downsizing of commodities has affected the stability and growth of many emerging markets, but the Fed needs to understand this new world that it finds itself in and not simply delay what they call is the inevitable without ever committing to carrying out the inevitable. The Fed needs to have a consistent plan going forward. Kicking the can down the road is not enough.
No matter what decision the Fed makes or when, Cambridge Realty Capital is prepared for this new age in the world economy. We understand the importance in monitoring the international markets but also know that the market here at home is strong. We will continue to do our best to ensure your investments are safe and secure.
