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Fed Rate Hike Could Stop Sooner


The 2018 calendar year regarding the stock market has been very interesting and volatile. There are a variety of storylines that have been very important towards the overall performance of the stock market. One of the biggest story lines that people have followed is what the federal government has done regarding interest rates. After a very long period of time having historically low interest rates, the government has started increasing interest rates this year. While most people expected that this increase in interest rates would continue for the rest of the year and even into 2019, and now appears that the increases could come to a stop faster than most people anticipated (https://www.cnbc.com/2018/06/08/fed-has-surprise-that-could-mean-early-end-to-interest-rate-hikes.html).

During the upcoming week, the Federal Reserve is going to meet and is expected to announce that they will be increasing the base interest rate by at least another quarter point. They are also expected to increase interest on excess reserves by a slight amount as well. This plan is expected to hold back the targeted rate for the future and could be an indication that the government is soon going to be ending its balance sheet roll off program.

If the government is able to reduce interest rates in the coming years, or at least keep rates from increasing too much more, it could have a variety of outcomes on the overall economy. One of the most significant ways that it will impact the overall economy is that it will help to make borrowing money more affordable. One of the advantages of the low interest rates over the past few years has been that the mortgage rates have been very low. At this point, it appears that rates will be going up in the near future. This will make buying a home more expensive. If rates stay lower, it could continue to benefit the housing market.

While lower interest rates are good in a lot of situations, they can also lead to an increase in inflation. The government will often increase rates in situations in which rates of inflation seem to be increasing. If the rates are not increased in the coming years, the government will likely keep their eyes on inflation rates to determine whether an increase in rates is justified. This will likely continue to be evaluated over the next few years as the Fed continues to hold their formal meeting on a quarterly basis.