Why The Fed Should Raise Interest Rates This Year

The United States Federal Reserve should raise interest rates this year. That is the opinion of Richard Fisher, Fed president in Dallas. He would love to see them go up slowly, Fisher told CNBC. He voted for raising them early and slowly.

Fisher made this statement on the same day that economist Larry Summers said that Fed should not be raising interest rates for now. In his opinion, prices are not going up looking at core inflation and house prices. He feels there is no reason until we see real signs of inflation.

Raising Interest Rates Too Quickly

Raising interest rates too quickly is something the Fed has done on many occasions in the past according to Fisher. Waiting on the unemployment rate to go down a lot further and raising interest rates afterwards more quickly is a bad idea; every time that strategy was chosen in the past, the economy ended up in a recession.

Nevertheless, Fisher expects interest rates to go up this year. The question is what the timing will be, but that decision is made by other people in the committee. He wanted to already get started in March, but he did not win that argument.

Someone else who spoke up about the interest rates of the Fed recently, is Warren Buffett. He stated that the disappointing growth of the global economy underlines that the Fed should not be raising interest rates just yet. Buffett told Fox Business that it might have international consequences if the Fed goes through with it.

In Buffett’s camp we also find Jack Welch, former CEO of General Electric. Welch believes like Buffett that raising interest rates in the short term is not a good idea. It would be strange if it happened in his opinion; it would push down exports even further and make the dollar even stronger. It would do no good for the US economy.