After recent economic turbulence in China and on Wall Street, the Federal Reserve decided not to raise interest rates last week.
Sunshine State News turned to Trish Regan, an anchor and markets reporter with the Fox Business Network, for insights on the Fed’s decision. One of the leading financial journalists on TV, Regan hosts “The Intelligence Report” on the Fox Business Network and, before that, hosted “Street Smart” on Bloomberg Television and worked as an anchor for “The Call" on CNBC. Regan is also a featured columnist for USAToday.
SSN: Did the recent market instability have any impact on the Fed's decision not to raise rates?
Regan: Unfortunately, this Fed may pay more attention to the markets than they should. The recent slowdown and sell off in China, which rattled investors here at home, definitely spooked the Fed. Janet Yellen explained that weakness in China affected her thinking.
SSN: Did the slowdown in China play any part in the Fed's decision?
Regan: It was a huge part of it. They disregarded some stable economic signs here at home, preferring to focus on weakness abroad.
SSN: Does the Fed's decision show a lack of confidence in America's economy?
Regan: Absolutely. This Fed thinks things are so bad here, and getting potentially worse due to overseas conditions, that it's completely paralyzed itself.
SSN: Besides continued lower rates on car loans, mortgages and credit cards, how will the decision impact Americans' pocketbooks?
Regan: Well, it sure penalizes savers. So much for making any money in a certificate of deposit at your local bank! The danger of rates too low for too long is that savers are forced into riskier and riskier assets because they need a return. They need yield. And they wind up investing in things that they shouldn't invest in. This is one way that asset bubbles get made.
SSN: Should we expect the Fed to raise rates in the next 12 months?
Regan: I've said all along, they wouldn't raise in September. I don't think they'll raise this year. They don't have the will. They're too fearful of negative consequences and, let's face it, China won't be improving anytime soon. The Fed is stuck in a corner and could find itself there for quite a while.
Reach Kevin Derby at firstname.lastname@example.org or follow him on Twitter: @KevinDerbySSN