According to the article, this will lead to the third interest rate hike this year. This is said to be a direct reflection of the strengthening economy. The following are quotes from Yellen regarding the current economic state and comments regarding the hurricanes.
"Economic activity in the United States has been growing moderately so far this year, and the labor market has continued to strengthen," Yellen said in a speech to a panel that included central bank officials from China, Japan and the European Central Bank.
"While the effects of the hurricanes on the U.S. economy are quite noticeable in the short term, history suggests that the longer-term effects will be modest and that aggregate economic activity will recover quickly."
As we have recently covered in class, the economy naturally bounces back from devastations, therefore Yellen's comment on historical data coincides with that we've learned.According to this article, what we've learned in class, and where we are in history, the rising of interest rates makes sense. Our interest rates are extremely low, relative to past years. If the economy is growing, inflation is reasonable and controlled, the interest rate hike will reflect where we are. Excited to see where this will take the economy and how another interest rate hike will affect us.
https://www.cnbc.com/2017/10/15/fed-chair-janet-yellen-sounds-upbeat-note-on-economy-and-inflation.html
The rebound may depend on how the government acts to help recover the damages. Even though that goes well, the cost would definitely be a lot, most probably affecting the US economy negatively for some time. The hurricanes weren't the only disasters, but the recent wildfire in North California would also add up to the losses and the damages the States has to repair this year.
ReplyDeleteOne risk that could derail Yellen's rosy outlook is the greater protectionism in US trade policies. If we make it harder for countries to export to us and make the goods we import more costly due to tariffs, this could slow growth. Companies need to import supplies and equipment from overseas markets sometimes to get the best deal. And consumers could end up paying more. Plus, if a trade war results, our exports will also be subject to tariffs and US firms may not be able to sell as much in overseas markets.
ReplyDeleteIt has clearly been affecting our economy in the short term. But as the economy recovers, I don't think it will have much of an effect in the long term. Kyul brought up a good point, the rebound will depend on how the government helps to restore the areas. The clean up can cost a substantial about of money. Money that the affected individuals do not have. They will depending on the government for help with clean up and restoration.
ReplyDeleteThese disasters have multiple implications on the behavior of consumers in the economy and the economy as a whole. I believe it will take some time before we see positives coming from these disasters. However, once reconstruction begins, there definitely could be a change in the interest rate as a result of increased demand for investment from businesses in affected areas.
ReplyDeleteAll of these are good points and honestly not sure which will be the most correct in the end. We will just have to wait and see the effects in the coming months as no one really knows what is to come. We all would hope the economy is going to keep booming, and any future downfalls are minimal.
ReplyDeleteI think it will take some time to see how the economy will rebound. Once the ball starts rolling on these, I could definitely see some increases in the interest rates. As you pointed out, Antonio, the rates seem extremely low compared to what they are usually at, so it will be interesting to see what happens in the upcoming future.
ReplyDelete