econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 17 June 2017

Raising The Federal Funds Rate Is A Good Thing?

Written by

We all "know" there is a correlation between economic growth and the federal funds rate. This week the Fed raised their federal funds rate a quarter point.


Please share this article - Go to very top of page, right hand side for social media buttons.


It seems very logical that an economy driven by credit could be slowed and accelerated by using interest rates. When viewing credit's relationship to GDP (see graph below), this relationship worked fairly well until the Great Recession.

Even offering significant reduced rates for consumer borrowing, it has not induced the consumer to borrow at a higher than the historical norm since the Great Recession.

Of course the federal funds rate used in the graphs above are not the rates the consumer or business borrows. But even so, the credit borrowing rates most of us see are low historically - but still did not induce a spending frenzy.

Business requires a return on investment, and obviously business is not seeing a potential of much return, reflected in weak response to the historically low rates of the past several years.

There is obvious growth decline in real estate loans, consumer loans, commercial and industrial loans. My position is most consumers or business do not spend money for items not needed - even with low interest rates. Demand for credit is low.

The consumer largest monthly outlay (housing) is being squeezed with rising costs for having a place to sleep.

It is hard to argue that the low interest rates were doing much good - the data does not support the concept that the ultra low interest rates were influencing economic growth. Is the consumer tapped out and credit is no longer a prime driver for consumer spending? It may not matter in the current environment what the interest rates are - as long as they are not too high.

Other Economic News this Week:

The Econintersect Economic Index for June 2017 continues to forecast normal growth for the second month in a row. Six-month employment growth forecast indicates modest improvement in the rate of growth.

Bankruptcies this Week from bankruptcydata.com: Gymboree, CST Industries, Soupman, GenOn Energy (f/k/a RRI Energy), CGG Holding

Weekly Economic Release Scorecard:

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.




Econintersect Contributors








search_box
Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.







Keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government





























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved