Over the last few weeks there were multiple calls to the radio show regarding the Federal Reserve’s recent interest rate moves and where they are going. There is a general questioning of why the Fed is moving to raise rates now.
It is really not a mystery though I think some people forget the last ten years. What we see now is the unwinding of the Fed’s support for markets. Raising the rates is a return to normal, which is an important part of the process of getting the economy back to normal overall. When ten year treasury rates were at 2.75% was that normal? Of course not! Who gives up money for that long for that little?
I understand that it is difficult to adjust to increasing rates, and that business plans are now in jeopardy. The fact of the matter is that normalization is a good sign, despite what the President or others may think. Rates can rise in an effort to keep the economy from overheating. There are many other changes happening right now, including tariffs and international trade tensions. These changes in particular seem likely to increase prices faced by consumers, which is a key factor for the Fed.
The economy doing well, international trade tensions raising prices, all seem likely to create conditions for rising prices, control and moderation of which is a key Fed mandate.