Reply to post: Re: The FED my be reversing that 0.25% rise

Higher US Fed interest rates will hit startups over the head

Anonymous Coward
Anonymous Coward

Re: The FED my be reversing that 0.25% rise

There has been some discussion in the Fed about whether they would have the option of setting a negative federal funds rate (the rate that is quoted as the Fed's "interest rate") A couple other countries have successfully done this so rather than being theoretical it is something they could actually consider. The idea is that by charging banks for the privilege of parking their excess reserves at the Fed it will encourage lending.

I'm not sure how much charging them 0.25% (for example) versus paying them only 0.25% affects the lend/no lend decision, but I suppose it could mean even easier money for rich VCs to borrow and bid up the valuation of so-called if nothing else I'm sure the scumbag running Uber would like it.

Hopefully the worst effects of the economic slowdown in China don't pass to the US and we avoid recession, and this isn't necessary. Since employment growth has continued to be relatively strong in the US even despite the layoffs induced by the oil price crash, and wage growth has recently strengthened, I don't think the US will tip into recession. It isn't like the US economy was ever growing strongly enough to get overheated, so barring some major 2008 style shock I think we'll muddle through and not see rates lowered, and instead see the regular 0.25% increases that had been assumed for 2016 simply delayed.

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