An Economic Balancing Act

After the fall of the economy in 2007, policymakers want to keep a healthy balance in today’s economy. The Federal Reserve does not want to repeat what some economist consider to be the worst financial crisis since the Great Depression of the 1930s.

According to a statement released by the Federal Reserve, the labor market is continuing to strengthen and the “economic activity has been rising at a strong rate.”

This week Fed policymakers agreed to keep the rates the same for November 2018.  The reason for

this decision was based on the continued growth of the American economy.  The Federal Reserve wants to make sure the growth stays at a healthy rate, neither too fast nor too slow. The benchmark rate, the determining factor for the cost of borrowing on credit cards, mortgages and other loans, will stay between 2% to 2.25%

Markets have gone up this month and the Fed will more than likely raise rates at the final 2018 meeting. This also suggest the rates will raise several more times in 2019. Policymakers explain that this is a standard reaction to the strong economy.  This will give central bankers some cushion if a downturn were to occur.

Not all of the aspects of the economy are at full force. Business investments have risen very little and the investors are curious to see if the Fed officials will anticipate a lower growth in next year’s forecast.

The job market is strong. In October, employers added 250,000 jobs.  Wages have also gone up 3.1% year-over-year. While this is good news for Americans, officials fear that low unemployment and higher wages might speed up inflation which could force the central bank to raise rates aggressively.