The Risk of the Fed’s Continuous Rate Hikes
This past week, the Fed raised interest rates by 0.25%. The effective Fed fund rate is now 1.63% – the highest since the big market crash of 2008.
However, it could get as high as 3.375% by 2020. The decade 2020 – 2029 could see a high-tech version of the early-1980’s when home loans fetched interest rates up to 18%.
It was only a couple years ago when raising rates seemed like a “boy who cried wolf” idea. Now we’re seeing one rate hike after the other, with two more expected for 2018.
Does the Fed have something up their sleeve, or are they hanging on to false hope?
The Fed is Either in Denial or Misleading Us About the Economy
While the Fed’s decision to raise rates was predictable, the rest of their announcement wasn’t.
In the recent FOMC report the Fed paints a rosy picture about the state of our economic situation. They stated the outlook has “strengthened in recent months.”
Then they claimed a better unemployment rate at 4.1%. And it is, if you’re only reporting the statistics that make things look good.
We know that rate is misleading for one simple fact…
Anyone who is not looking for work is not considered part of the calculation.
As more and more people leave the workforce altogether, and give up looking for work, they get culled from the calculation reported in the media which skews the statistic.
The truth is, the unemployment rate is much higher than the media reports. It’s actually closer to 8.2% as of February 2018.
So is the Fed in denial about the state of our economy? Is it telling white lies? Or a combination of both?
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