3 Reasons Higher Interest Rates Are On The Horizon

Rick Rieder, a Managing Director with BlackRock, lists three reasons the Federal Reserve will enact a federal interest rate increase sooner than later:

1. The labor market is improving: Although some economists are alarmed that many American workers have given up looking for a job, Rieder argues August is usually an unpredictable month. Examining a broader timeline, “the current run-rate in job creation is still on par with that of past periods of economic expansion.” Also, examining other metrics like U-6 unemployment and initial jobless claims suggests the economy is expanding.

2. The beginning of wage inflation: The article argues, “tighter short-term labor market conditions are beginning to spur some wage inflation.” Increasing the federal interest rate would help offset this.

3. The current low rates may harm the economy: For example, lower federal interest rates may cause older workers to hold jobs for longer and prevent new workers from entering the workplace. Additionally, companies could delay in investing or hiring.

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