- The Fed could very well raise rates because they fear the prospect of higher inflation and imploding asset bubbles bringing down the economy.
- So if they act, the economy goes out either with a fizzle or a bang.
- But, as it turns out, the risks of accelerating inflation is remote and an asset crash isn’t likely to bring the economy down.
- The fundamental problem is that interest rates aren’t a very effective policy tool and cannot serve two masters, the real and financial sectors.
- The fundamental problem is that there is too much investment in the financial sector and too little in the real economy, and interest rates cannot correct that.
Will The Expansion End With A Fizzle Or A Bang?
July 29th, 2017 · No Comments
Tags: Monetary policy