There is little doubt that the Fed has to raise rates sometime in the future. The question is when. Some analysts feel that it has to be sooner than later to prevent other economic issues down the road. The ultimate goal is for the economy to gradually strengthen so Mr. Bernanke and company can slowly raise interest rates. Raising rates too soon could dampen economic activity by making borrowing more expensive for businesses and consumers.
However, waiting too long to raise them could let inflation build momentum, leading to a rapid increase in key rates that also undermines economic growth.
The statment made after last week's meeting of the FOMC pretty much reiterated recent ones that hint the increases will be later than sooner. Some market analysts believe that is a mistake and that rates need to be raised this year. Others think the employment and housing sectors are still too weak to start raising rates. Who is correct? The future will show us, but in the meantime the debate will continue.
And, of course, it's always good if we can laugh a bit about ANY situation, so...
"Federal Reserve Chairman Ben Bernanke testified before Congress yesterday. I don't want to say the financial situation doesn't look good, but he testified via satellite from the Cayman Islands."
This guy is walking with his friend. He says to this friend, "I'm a walking economy." The friend asks, "How so?" "My hair line is in recession, my stomach is a victim of inflation, and both of these together are putting me into a deep depression!"
Until Next Time,