Federal Reserve rates Delay Increase Why Good and Why Not?
Federal Reserve discussed a probable raise in the interest rates all through the summer keeping hopes high. The near zero interest rate has been that way since the Great Recession struck in 2008-2009. In recent months the Federal Reserve decided it was not the right time for a raise as inflation rate was low and the global economic conditions were not stable.
Low interest rates set by the Fed is one of the factors that encourage people to borrow money which in a way boosts the money supply in the market. Thus it is a tool that is used to support economic growth. It is seen as an opportunity to get a cheap loan that's easy to repay. It is good for buying homes, cars as well as starting a private business.
When the interest rates are low, the gains from a savings account seems to be minor, making people look for other investments resulting in spending elsewhere powering the economic growth.
However, it's not good in every way as the risk of inflation grows with a low interest rate. It is quite simple as greater amount of money in the market means money loses it value.
Federal Reserve, by keeping the interest rate low has maintained a policy of keeping the economic growth encouraged. But recent job gain numbers have disappointed the Board members as increasing the rate will mean making borrowing more expensive and chances of increasing a job cut rate which may push the economy towards recession.
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