It would be helpful if someone would lay out exactly the economic mechanism that gets us from yet lower interest rates to actual economic activity.
Sentiment: NEGATIVE
The impact of low interest rates is broad and deep. Many Americans rely on interest income from their savings to help cover their cost of living.
Low interest rates are a big opportunity for investment. But the issue is that this money should go to the real economy, not the financial economy.
Should that worse scenario materialize, then most probably our propensity to increase interest rates will be weaker.
Low interest rates benefit individuals or investors who own or want to buy assets; in that regard, they disproportionately benefit wealthier Americans.
Interest rates are used to achieve overall economic stability.
The Fed's ability to raise and lower short-term interest rates is its primary control over the economy.
Interest rate cuts have an effect in stimulating an economy by directly or indirectly making someone, somewhere, spend more than they otherwise would. That extra spending increases demand and ensures that we all carry on with work to do, without us having to slash our prices or our wrists.
Low interest rates are usually attributed to low inflation, weak economic growth and super easy monetary policy. But there's another deep-seated factor that doesn't get much attention: demographics.
Monetary policy is like juggling six balls... it is not 'interest rate up, interest rate down.' There is the exchange rate, there are long term yields, there are short term yields, there is credit growth.
We believe that the Federal Reserve has to carry on with a progressive increase in interest rates as a consequence of the American economy.