Raising Interest Rates Enables The Federal Reserve To Increase Its Monetary Policy Tools.

The US economy has been growing for several years. At the time of world economic risk accumulation, US policymakers are also worried about the domestic economic recession.

But compared with the economic crisis, the United States is more worried about whether it will suddenly find itself depleted in the face of the next economic crisis.

Jon Hilsenrath, a Wall Street Journal reporter who has the name of the Federal Reserve news agency, said that no one now believes that the US economy will soon be in recession, but Douglas Elmendorf, the outgoing director of the US Congressional Budget Office, said that policymakers are already preparing a deeper response plan for the backup plan for the economic crisis.

Raising interest rates is a good way for the fed to increase its future available monetary policy tools.

Raising interest rates may boost housing recovery

For those who want to buy a house, raising interest rates will encourage them to end their wait-and-see actions and start taking practical actions.

Because raising interest rates will remind them that lending rates will not always be as low as they are now.

Lawrence Yun, chief economist of the US Real Estate Association, said that with the steady growth of employment, potential buyers will be able to withstand the gradual increase in mortgage interest rates.

In general, the central bank raises interest rates to prevent economic overheating and curb inflation.

For the current US economy, few people believe that there is a sign of overheating in the economy, and that inflation in the United States remains at the target set by the Fed.

Considering these factors, the Fed has no need to raise interest rates.

But the recovery of the US economy has been firmly recognized by the market. In August, the unemployment rate in the United States dropped to a seven year low of 5.1%, reaching the level of the Federal Reserve's full employment.

In this case, continuing to keep low interest rates near zero will lead to a cautious attitude towards the recovery of the economy by consumers and corporate executives, which can lead to a suppression of consumer demand.

David Kelly, chief global strategist at JP Morgan chase, wrote in a report to clients that "by maintaining low interest rates, I think the Fed will continue to exert pressure on economic growth and demand."

Kelly believes that although interest rates usually increase pressure on demand growth, there is evidence that the initial increase in interest rates can actually boost demand growth based on very low interest rates.

Even the stock market, which is a low interest rate beneficiary, is right.

The decision to raise interest rates is also disappointing.

Wall Street had previously mentioned that after the announcement of the FOMC meeting, the US stocks rebounded after a sharp fall.

The S & P 500 fell 0.25% to 1990.25 points on the same day, the Dow Jones Industrial Average fell 0.38%, at 16677.01 points, and only the Nasdaq composite index closed up 0.10%, reporting 4893.95 points.

In a report released on Monday, Merrill Lynch said that the interest rate stability of the Federal Reserve was actually bad, and the stock market yield fell after the Fed's stimulus policy.

Ed Yardeni, President of Yardeni Research, an investment consultancy, also said that the Fed was somewhat worried about the market and that the market had already prepared for raising interest rates. The Fed should have acted.