FED RATE HIKE OR NOT ?

Improvement in the U.S. economic picture has increased expectations that the Federal Reserve will raise interest rates first time in 2015 since 2008. The Fed (Federal Reserve) believes strong employment and low inflation coupled with a falling oil price allows flexibility to hike rate from emergency 0-0.25%. The stronger job market gives the Fed reason to consider raising short-term interest rates to prevent the economy from overheating ( An economy that is expanding so quickly that there is concern about inflation rates  rising the Federal Reserve usually tries to slow the economy’s pace by tightening the money supply. This causes less money to be chasing after goods and services), but low wage growth and inflation suggest such overheating isn’t near and have gived them cause to wait. They waited for the arrangements in labor economy and their expectations turned reality, so US unemployment rate hits 5.1 % lowest in 7 years – HOWEVER ; It’s not enough to rate hike , because that happened  before, in 1937 after great depression , the US unemployment has fallen down sharply  after rate hike. (History repeats itself.)

  • IMG_0733IMG_0102First, I don’t expect the Fed to raise rates in 2015 because of global economic slowdown (China’s situation) and volatility in stock markets. However, if the fed decide to raise rates , there will be losers and winners. 

 

 

 

 

 

 

 

 

 

 

 

 

AFTER RAISE RATES – LOSERS: 

Resim1

AFTER RAISE RATES – WINNERS: 

Resim5

 Source : Fred

We will  wait and see tomorrow what happens, it seems to me that rate hike’s disadvantages for all countries is more than the advantages, inclusive US.