Throughout the entire year, we’ve heard from the Federal Reserve that they are likely to raise rates relatively soon. While I was under the impression that a rate hike would be bad for the economy, I had a conversation with a friend about it yesterday; and I have to say, he made some very valid points. His entire argument was that at this point, the fact that the Federal Reserve has been so indecisive is actually hurting the United States economy more than helping it. So today, we’ll take a look at the situation from both sides of the argument to determine whether or not the Fed is actually causing harm to the US economy as well as the US market. So, let’s get right to it…

Why I Was Under The Impression That A Rate Hike Would Actually Harm The US Economy

To understand how a rate hike could hurt the economy, it’s important to understand why the rates were reduced in the first place. Back in the depths of the 2008-2009 financial crisis, the Fed reduced the interest rate in an attempt to stimulate the economy. In doing so, consumers would spend less on interest and have more money to spend on consumer products. When this happened, we all knew that it wouldn’t last forever. In fact, the Fed would only keep rates that low as long as it was needed.

Fast forward nearly 7 years. There are experts on both sides of the fence. Personally, I believe that with the struggling jobs report from August as well as the declining consumer price index, a rate hike would put too much unnecessary pressure on the country’s economy; pressure that could lead to the next recession.

It’s also important to take the worldwide economy into account. The reality is that the worldwide economy is very intertwined. Therefore, anything that affects the US economy is likely to have an affect on the rest of the world as well. With China, Europe and several other countries struggling, I wasn’t sure that the world would be able to take such a hit. Then, my friend came in with his very valid argument…