However, it could also be that you had really good interest rates, then got in the bad habit of making only minimum monthly payments and companies
responded by raising interest rates.
For example, a reduction in capital inflows can deflate asset bubbles and so discourage consumption through wealth effects, or such a reduction can lower consumption
by raising interest rates on consumer credit, or even by encouraging stronger consumer lending standards.
In late 2009, for example, Australia surprised the financial markets
by raising interest rates at a time when most other countries were lowering rates.
Since retiring in 1992, my only losing year out of the last 17 was a 10 % loss in 1994, the year that Alan Greenspan surprised the
market by raising interest rates very sharply.
While Brazil and Indonesia have both been able to offset some of the effects of Bernanke's
comments by raising interest rates (both countries increased their rates by 50 basis points in the past week), India can not afford to do the same, and has seen an outflow of capital as a result.
I laugh and sometime sneer at those who think new Fed Head Jerome Powell will impose monetary
discipline by raising interest rates at least up to the real rate of inflation and reduce the Fed's balance sheet according the schedule as laid out by Yellen.
In the late 1970s he coped with the U.S. balance - of - payments deficit (stemming mainly from overseas military spending) and consequent the inflationary
pressures by raising interest rates to 20 %, thereby plunging stock market and real estate prices.
Canada wasn't the focus of the panel discussion the governor was participating in, but Carney did hint, in passing, that the BoC is willing to put up with higher than two per cent inflation in order to avoid hurting highly indebted Canadian
households by raising interest rates too quickly.
The Fed takes away the punch bowl by raising interest rates
[1] On the contrary, the commentator noted, the Fed could have slowed the
bubble by raising interest rates and boosting margin requirements on stock trading during the tech bubble.
In 1845, the Bank of England tightened its monetary
policy by raising interest rates, which has a tendency to pop economic bubbles as capital is no longer as cheap as it once was and now higher - yielding bonds become more attractive to investors again.
Central banks control interest rates like a puppet on a
string by raising interest rates or buying up bonds to increase the value of their currency, or lowering interest rates and selling bonds to decrease it.
By raising interest rates when the economy is doing well and the job market is strong, the Fed intends to head off inflation, which would reduce the buying power of the money you earn.
The banks usually get quite a lot of the principal balance back off credit
cards by raising interest rates (to the default rate) and by charging late fees, over-limit fees, etc..
Crudely put, the theory states that when inflation rises above a prescribed level (typically around 2 %), central banks must
respond by raising interest rates, which quells consumer demand and causes inflation to fall back to «acceptable» levels.
That is, would expectations of outsized demand growth — of, say, 4 percent per year over the next four years in inflation - adjusted terms — generate undue inflationary pressures that would require the Federal Reserve to respond
by raising interest rates, essentially killing off any actual growth that those expectations could generate?
So, actions today effect —
by raising interest rates, will affect the economy down the road.
The Federal Reserve is in no hurry to slow down the economy
by raising interest rates, but...
By raising interest rates to fight...