Training Wheels Off: Getting the U.S. Economy to Stand on its Own

By CultureBanx Team

  • Bostic voted for the Fed’s interest rate hike target range of 2% - 2.25%

  • Market selloff was sparked by a sudden rise in interest rates

Stocks just came off their longest week long slump since March, following a decline that slashed 1,400 points from the Dow Jones Industrial Average at its lowest point. The potent market selloff was sparked by a sudden rise in interest rates, something that Atlanta Fed President Raphael Bostic said will likely continue to get the U.S. economy back on track.

Why This Matters: Bostic spoke earlier this month and proclaimed the Fed should continue to raise rates until it gets to a neutral policy stance in order to assess how the economy is really doing. “Current conditions suggest, to me, that we ought to get to a policy stance where our foot is neither on the gas pedal… what we call an accommodative policy… nor on the brakes… what we call a restrictive policy,” Bostic said in a speech at an education conference in Atlanta.

Ultimately Bostic is more reserved than his federal reserve counterparts

The downward spiral in the stock market has accelerated due to a host of concerns about valuations, in an environment where the Federal Reserve is steadily lifting interest rates to normalize policy from crisis-era levels. Especially because higher yields raise borrowing costs for corporations, they also divert investment away from stocks.

Bostic did vote in favor of the Fed’s recent interest rate hike target rate range to between 2% and 2.25%, it’s the third rise in rates this year. While that number continues to increase, the jobless rate fell to 3.7%, the lowest level since the Vietnam War.

What’s Next: Ultimately Bostic is more reserved than his federal reserve counterparts, and would prefer to raise interest rates in a way that wouldn’t restrain economic activity. The Fed is expected to lift rates again this year and continue with increases in 2019.

CBx Vibe:ATM” J. Cole