2 years, 7 months ago
Will the Fed start raising interest rates? Is the Stock Market ready for the rate increases?
Will the Fed start raising interest rates to strengthen the dollar and fend off inflation?
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M$1 Answer
The Fed raises interest rates when the FOMC consensus is that inflation is a greater concern than further economic slow-down. Thus, once the FOMC concludes the economic recovery is well on its way, rate increases become more likely. This is not likely to happen for a few more weeks or months at least, in my opinion. With unemployment as high as it is, consumer spending is not exhibiting any irrational exuberance, which helps keep prices in check, reducing the likelihood of inflation heating up soon.
As for the stock market, it usually prices in expectations of rate increases, inflation/deflation, etc. This does not mean the expectations end up materializing, at least on the expected time-table, but it means that stock prices usually already include everything that the market expects is likely to happen in the near term future.
As for the stock market, it usually prices in expectations of rate increases, inflation/deflation, etc. This does not mean the expectations end up materializing, at least on the expected time-table, but it means that stock prices usually already include everything that the market expects is likely to happen in the near term future.
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M$
By 2011, US debt will exceed 100% of GDP. Large foreign reserves will need higher interest rates to offset a weaker dollar.
The has been indicating that it will raise interest rates soon. Treasury chairman has been in constant communication with the financial institutions and banks. It seems like interest rates are due to start rising along with taxes.
High unemployment is not a reason to defer raising interest rates and taxes.
The Fed is lining up repurchasing parties which will sell Treasuries with a promise to rebuy them at a higher price to the banks.