Does the Fed NEED To Raise Interest Rates?

[Smaulgld]

It seems to make no sense that the Fed would raise rates given the strong dollar, relatively weak economy and while other central banks are lowering rates. So why is the Fed talking about doing so? Perhaps they need to drum up demand for US Treasuries.

https://smaulgld.com/does-the-fed-ne...n-initiatives/

[Zippyjuan]

If the Fed raising interest rates increases demand for US Treasuries, that demand will raise the prices of Treasuries which means lower interest rates so we would be back to where we started. Demand for US Treasuries is very strong as evidenced by their high prices and low interest rates.

[mosquitobite]

The real estate market needs the boost from an increase in rates. Many people are sitting on the sidelines whereas a slight increase in rates would send them into the market.

We also need to encourage more savings, less spending. A higher interest rate on savings accounts could go a long way towards long term healing in this nation. So long as we all live pay check to pay check - NOTHING - will improve.

[Zippyjuan]

The Fed can only influence short term interest rates (except when they were buying long term Treasuries to try to raise those rates- the rate they do set is the rate banks can borrow short term loans -typically overnight- from the Fed though when the Fed changes it, other rates may follow). Mortgages are typically tied to ten year Treasury yields which are determined by auctions- supply and demand. Now if those rates did rise, it would not be a benefit to the housing market. Higher mortgage rates raises the costs of buying a home which would mean lower demand.

You are right that higher interest rates would encourage more savings.

In either case, any changes in rates by the Fed will be small and incremental- probably a quarter of one percent- and would not have much significant impact on anything.

[jllundqu]

I'm scrambling to buy a house before the FED raises rates... even a modest increase in the rates would mean a major difference in what I could buy in this market... Hope the FED doesn't raise in JUNE and would be nice if they didn't in SEPT either.

[otherone]

I'm scrambling to buy a house before the FED raises rates... even a modest increase in the rates would mean a major difference in what I could buy in this market... Hope the FED doesn't raise in JUNE and would be nice if they didn't in SEPT either.

Don't sweat it. The market is soft now; rising rates will only further destroy home values. You should get a better price if that occurs.

[Bossobass]

The real question is why did the FED artificially lower rates for a decade that blew up a titanic bubble until it exploded, then lower rates to zero, offer to pay interest on excess reserves that they handed over to the world's largest banks in cash, by buying their toxic paper for 100 cents on the dollar and engaging in currency swaps with foreigners?

Beyond that cluster $#@!, who cares what they do? The FED is insolvent. They should be liquidated.

[Zippyjuan]

buying their toxic paper for 100 cents on the dollar

Sounds like a fair price.

[stuntman stoll]

Don't sweat it. The market is soft now; rising rates will only further destroy home values. You should get a better price if that occurs.

6 of one, .5 dozen of another. Generally, when rates rise, prices tank and vise-versa.