Fed Reserve Maintains Interest Rates, Prompting Concerns for People Struggling with Debt

The Federal Reserve recently held a two-day meeting, at which the country’s central banking system announced that it will not be raising interest rates, which could mean that more personal bankruptcies are on the way as the economy continues to struggle.

Although the decision not to change the interest rate has at least temporarily allayed some market watchers’ concerns about what might happen if the Fed reacted too strongly to a stagnating economy, there remain fears that the government will be helpless when it comes to stopping another recession.

Will the Fed Eventually Raise Interest Rates?

Some economic experts still believe that the Fed will eventually have little choice but to raise interest rates as the U.S. economy remains stagnant – something that the Fed did not dispel when it indicated that a rate hike could still be coming in June. Earlier this year, several market observers predicted at least two interest rate hikes before the end of 2016.

When determining whether to raise the interest rate, the Fed will likely consider a number of factors, such as the inflation rate and any “global economic and financial developments.”

The problem right now is that economic growth in the first few months of 2016 has come to a standstill, even as the labor market improves somewhat and the unemployment rate remains relatively steady at around 4.9 percent.

What Are the Implications of an Interest Rate Hike?

When the Federal Reserve makes the decision to raise rates, what generally follows is a period of economic flatness as the market works to adjust. This isn’t the worst thing in the world, of course, especially if the U.S. is heading toward another economic recession.

Sometimes, however, it is the anticipation of an interest rate hike that can cause volatility in the markets, leading to less spending as consumers begin to worry about whether they will be able to afford their home mortgages and other living expenses.

Worse yet, without any kind of immediate boost to the economy, people who are trying to remain afloat amid crippling debt may find themselves in bad financial shape in the immediate future.

To learn more, see the Yahoo.com article, “Fed Signals No Rush to Hike Rates as Economy Hits Soft Patch.”


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