There has been speculation for some time as to when the Fed will raise the benchmark federal-funds interest rate. Since the economic recession the Fed has kept the interest rate low at almost zero percent in order to stimulate the economy. With the recent uptick and substantial growth seen in the markets, many economists believe it is time to raise the interest rate. A new poll conducted by The Wall Street Journal states that 82% of the economists polled believe the Fed will raise the interest rates in September of this year. 13% of economists believe the Fed will hold off until December of this year to raise them.
The interest rate has stayed at a remarkably low number for quite some time now, and the raising of the interest rate would be the end to a historic period of monetary stimulus. Although speculation abounds, there has been no definitive word from the Fed chair, Janet Yellen. Her recent speech to the Senate Banking Committee was par for the course and exactly what the committee has come to expect from her. This is probably for the best, as many economists dissect every word she says and merely implying something could have dramatic impacts on the market.
This poll signifies the confidence of a number of economists who believe that the American economy is continuing to strengthen. This is bolstered by the recentJuly Jobs report that showed steady growth in the private and public sector for the sixty-fifth consecutive month. 215,000 jobs were added in July and average hourly earning went up .2%. Although not a landmark month, this continuous growth may be what has the Fed eyeing an increase in the interest rate.
Not everyone believes that the Fed will raise the interest rates in September. Warren Buffett recently speculated on the difficulty of raising the interest rate considering the recent economic turmoil in Europe and China. That said, if you are looking to make a large purchase, you should do it soon because once the interest rate goes up it will cost more to buy big-ticket items such as a new house, car, or boat. With an increase of the interest rate, the dollar will be stronger internationally, so now may be the time to plan that vacation you have been putting off.
As we end this unprecedented period of no interest rate, whether it is in September or later, Cambridge Realty Capital is prepared for the next chapter. Our knowledge and experience in financing has always made us ready for the next chapter and this is no different. We understand the markets and are prepared to profit in this new chapter of financial growth.