The Federal Reserve is bracing Americans for higher interest rates in the near future, likely coming by the end of the year. The decision on a rate increase depend on conditions in the American economy, said Federal Reserve Governor Jerome Powell on Tuesday.
Powell said there is a “50-50 chance” of an increase in September, but the Fed is waiting to see the data. These comments were made during a live-streamed morning discussion hosted by the Wall Street Journal.
Powell said if the economic health indicators reach a certain threshold, one or two rate increases are possible this year — timed for September and December. A rate hike means the economy has rebounded from the past downturn. While there has been recovery, the economy has experienced slowed growth this year.
Chair of the Federal Reserve Janet Yellen said last week in a press conference that 2015 growth is lower, predicted to be about 2 percent. In 2014, the economy grew by 2.4 percent.
When asked about current high prices for homes, Powell vehemently denied that there is a current housing bubble. He argued that current market conditions are different from those during the Great Recession. During the housing bubble, “Mistakes were made about regulation, supervision, and imagination–few people [could see] this happen.” Economic analysts tend to agree this view, citing slowed growth in prices and new home construction.
Artificially low interest rates concern economists when they create market bubbles where assets, such as homes, become overvalued. The 2008 financial meltdown was due, in part, to a housing bubble spurred by subprime mortgage lending.
