Ortiz: Federal Reserve Must Not Raise Interest Rates–for Good Reasons

Booming US Economy
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ALFREDO ORTIZ

Alfredo Ortiz of Job Creators Network writes in The Hill that the Federal Reserve raising its rates this week would not only rock shaky financial markets, but, more significantly, threaten one of the best economies and labor markets in a generation:

Rocky financial markets are just the latest reason the Federal Reserve should hold off on raising interest rates at its meeting this week. So far this month, the Dow Jones Industrial Average and S&P 500 Index have each fallen by nearly seven percent. All three major stock indices are flat for the year as markets have negatively reacted to an overly aggressive Federal Reserve. This pullback in the markets impacts the retirement, savings, and college accounts held by ordinary Americans. It makes them feel poorer and reduces their propensity to spend, invest, and donate.

The price of assets and its economic impact is known as the wealth effect. People feel wealthier when the value of their assets are rising and are therefore more likely to stimulate the economy through their purchases. This is a significant factor the Federal Reserve draws on when deciding whether to raise, lower, or maintain interest rates. But the diminished wealth effect is just one of several reasons why the Federal Reserve should not raise rates this week. Perhaps the biggest justification is that doing so threatens one of the best economies and labor markets in a generation.

Over the past six months, our booming economy has grown by nearly four percent. For the first time since 2005, annual growth is on pace to exceed three percent, which is about 50 percent higher than the rate under President Obama. The unemployment rate has not been this low since 1969, when men were drafted for Vietnam. Minorities enjoy the best job climate on record, and wages continue to grow at a clip.

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