MoneyRates Blog
Interest Rate Rises Only a Matter of When?
By Andrew Freiburghouse | Money-Rates Columnist
Impatient savers tired of low interest rates paid on deposit accounts are likely to receive the gift of higher interest rates sometime within the next year, if the economy recovers. According a recent survey of economists at the National Association for Business Economics, upwards of 90 percent believe that the recession will end in 2009.
Mortgage-seekers won’t enjoy interest rate rises nearly as much as savers, of course, but should be aware of the same macro-economic probability of interest rate rises sometime within the next year.
“Economists Predict” a Rather Flimsy Statement
Predictions of economic recovery and rising interest rates by economists is not, perhaps, an indication that either will happen on their schedule. Some people even maintain that economists are always wrong.
Keep a Strong Eye on Interest-Rate Affecting Facts
When watching for the direction of interest rates, it’s important to maintain sight of important facts, not just “important people” opinions. Three facts to watch when watching for the direction of interest rates are:
– Unemployment. With consumer spending so important to the economy, it’s hard to see a full recovery happening with the consumer under such pressure.
– The Fed Funds Rate. The most important interest rate in all the land.
– Gold prices. Large-scale movement of money into gold can be taken as a lack of confidence in the U.S. dollar.
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1 Comment »
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August 24, 2009
jmoney says:
I think there have been a number of stimuli that the Federal Government has pushed into the economy. These stimuli are missing important factors though.
First, I don’t see that the stimuli are broad-based. For instance, “Cash-For-Clunkers”, the stimulus was narrowly based to one industry, (which the Federal Government owns now.) rather than to the broader economy.
Second, as you stated, unemployment and the ensuing lack of confidence is the key driver of depressed consumer spending. Rather than spending billions of dollars to overhaul healthcare, how about spending those same billions of dollars on public works (infrastructure) projects that employ those who are not employed and feed those dollars directly back into the economy via increased demand (which will drive supply). When the economy restarts, the infrastructure projects can be farmed back out to private enterprise. (The assumption is that the Government would actually get out of the business.)
Third, with unemployment dropping due to infrastructure projects, welfare can be pared back and eventually eliminated and/or transferred back to the states and local governments where it actually belongs.
