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Economic Daily News: Will the Fed raise interest rates?

Economic Daily News: Will the Fed raise interest rates?

The U.S. Federal Reserve will decide on Sept. 17 whether to raise interest rates. Although economists are predicting an only 28 percent chance of a rate hike, countries around the world are all awaiting the most important decision since the 2008 global financial crisis. There are different opinions on whether the Fed should raise interest rates. Christine Lagarde, managing director of the International Monetary Fund, said the Fed should not rush its decision to raise interest rates and must be certain that the job market and inflation are strong enough to justify a rate hike. At the conclusion of a two-day meeting of G20 finance ministers and central bank governors held Sept. 4-5 in Turkey, the financial leaders released a communique saying that "monetary policies will continue to support economic activity consistent with central banks' mandates, but monetary policy alone cannot lead to balanced growth." "We note that in line with the improving economic outlook, monetary policy tightening is more likely in some advanced economies," the statement said. The so-called "advanced economies" obviously referred to the United States. Haruhiko Kuroda, governor of Japan's central bank, said a Fed interest rate increase would be good for the world economy because that would demonstrate that the U.S. economy is enjoying steady growth. The economic situation in the United States remains the key factor that will determine whether the Fed will raise interest rates. Based on the information available so far, America's real economy is indeed recovering. In the second quarter, the United States' real GDP growth reached 3.7 percent, far higher than the previously forecast of 2.3 percent. The unemployment rate in August dropped to 5.1 percent, with the average weeks of unemployment falling from 31.9 to 28.4. Real manufacturing output is 8 percent higher than the highest level recorded before the global financial crisis. Labor productivity is 18.4 percent higher than before the global financial crisis. Capacity utilization has been steady at 77 percent, while the inventories-to-shipments ratio for durable goods is 1.76. In July, the core consumer price index rose by 1.8 percent year-on-year. Although the index did not reach the 2 percent target, asset prices, such as housing, have hit a new high. In June, the house price index compiled by the Federal Housing Finance Agency exceeded the peak recorded in June 2007 at the height of the last housing bubble. If the Fed delays its decision to raise interest rates, there is no guarantee that the mortgage loan crisis will not repeat itself. (Editorial abstract -- Sept. 15, 2015) (By Y.F. Low)


Updated : 2021-09-29 04:44 GMT+08:00