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Raising Interest Rates

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Federal Reserve Chair, Janet Yellen, has confirm that the Fed is on track to increase interest rates later this year. However, concerns of “unanticipated developments” could delay or accelerate the process. And although the economy shows signs of growth, certain factors such as businesses restricting its investment and housing, is causing pause. Businesses holding large amounts of cash suggest they are risk aversive due to the uncertainty of the economic policies, and are not willing to increase its expenditures. While home prices and sales have increased, residential construction is not very strong and mortgage loans are still hard to get.

Interest rates have been near zero since 2008. Economists speculate that the rate hike is likely to happen in December of this year. Accordingly, inflation is below the Fed’s 2% target. The rate increase is expected to be gradual, so we might still see low rates a little longer.

Source: “Yellen reiterates rates likely to increase this year” Housingwire (July 10, 2015). Yellen: Fed still on track to raise rates this year LA Times (July 10, 2015).

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