If the United States’ economy were a human body, then its heart would be the Federal Reserve. And just as the heart works to pump life-giving blood throughout the body, the federal reserve pumps money into the economy to keep it healthy and growing. Sometimes the economy needs less money, and sometimes it needs more. Fed increased the interest rate from 0.75 to 1% in the first quarter of 2017 and practiced the same two times that year. The central bank revealed that the labour market strengthened and economic activity continued to expand at a moderate pace. An uptick in job creation, household spending, and the unemployment rate can’t be ignored too.
William Dickens, a Distinguished Professor of Economics and Social Policy and chair of Northeastern University’s economics department, weighed in on the Fed’s decision and drew his conclusions on this decision’s implications on average Americans, including students and young alumni. When asked about his assessment on the rate hike and its conditions, he wasted no time in giving the due credits to the stronger economy’s factors. Job growth at a marvelous rate, lowering unemployment rates, and getting out of the recession with utmost ease are the benefactors of this dominant economy.
Consumption spending is one of the largest parts of the economy. When that is going strong, then the rest of the economy is likely to be going strong as well. Almost negligible hike in interest rates shouldn’t be missed while appreciating the economy’s growth. The rates would impact an average American by its ability to affect the treasury bills, bonds, and the lending and borrowings. That means people who will be taking out mortgages in the future would be entitled to pay higher rates. Car loans would turn more expensive. However, an American is likely to earn more on their certificate of deposit or their bank account which in turn isn’t a bad deal!
Harminder Singh