Was FED right to raise Interest Rate under current market Situation?

What Federal Reserve did today was little shocking for the market and for me too. It’s OK to increase the rate, which was a foregone conclusion. My concern is not about FED raising .25% interest rate. However, statement made by fed chair was very concerning. I may not be competent to judge his ability but that’s just my personal thoughts. Why do I say this? The reason is, market across the globe are already in deep trouble, China, Japan, Europe is a mess and U.S. market never saw the volatility of current magnitude, what I can recall in last couple of decades. There is no doubt in my mind that economy is strong - jobs, wages, retail sales, consumer confidence and so on. 

There are also significant issues surrounding the market, such as, trade war, Europe political mess, low gas price, subdued home market, volatile capital market. The people are spending thinking they have Job, income, stock market is booming and so on. Once market starts falling deeper and deeper, people will feel they don’t have enough money, they will lose their confidence and start cutting their budget. The U.S market is still strong because of consumer spending. Once consumer spending starts dropping, corporates will reduce their spending too. Fed indicated that, they will be raising another two rates next year? Also, said, we are not concerned by little volatility in the market? Fed could have said that, we will evaluate the economy situation (micro & macro level) and depending on the available data we will take appropriate action. I mean something in that line. It could have given the market a big sigh of relief. I am apprehensive, if the market continue to lose for next few days or weeks, we will be dragged into a bear market. Let’s hope and wish that it does not happen!! 

Comments

Popular Post

Shesa's JANUARY 2025 Investment Blog

Trump Presidency and Q4 Earnings and

WEEKEND UPDATES - 2/1/25