So we have the FED, thinking its time to raise interest rates in the United States. The problem is, they could not be more historically wrong.
Years ago, before the Half-Trillion Dollar U.S. Annual Trade Deficit, back when we had a manufacturing based economy, it was necessary for the FED to keep interest rates higher to help tamp down inflation. The Fed's chief inflation-fighting tool was to raise interest rates. Higher interest rates helped the banks remove more currency from circulation and when fewer dollars are chasing goods and services, that generally works to control price inflation.
With today's aggregate foreign trade deficits already doing the work of "Higher Interest Rates," by removing billions of dollars from the domestic economy, raising rates is the very last thing the Fed needs to do.
Today, Interest Rates are heading back down. The stock market has fired a warning shot at raising interest rates faster than the economy can fundamentally justify. My prediction? Interest Rates will remain range-bound, until trade fundamentals affecting the U.S. change.
Mike Askins, Realtor, Owner ARG
Got questions for Realtor Mike? Call me at 214-727-3686 (mobile)