would a small interest rate hike help spur some growth?

[themaguffin]

Now I'm just asking - I am not well versed enough in economics to know if what I've asked is the stupidest thing on the planet, but I ask this because rates are as low as they can be. That's great for borrowing, but housing isn't moving faster because of it - and since the rates are so low, pulling the lever to lower them more to stimulate activity is not an option.

Leaving them where they are is suggesting that things are not getting better, but if they just slightly increased rates would that not tell the media and therefore wall st, investors, etc etc that there is some improvement therefore stimulating some more activity? It also might get people on the fence on buying a house (who are in a financial position to do so) to go ahead before rates climb more substantially?

Is that ridiculous? Would that hinder the fragile state of borrowing for middle and lower income families too much to marginally increase interest rates?

[dkf]

1. It's the opposite way around. You don't raise rates to make people think the economy is getting

Better. You raise it when it is getting better. There is data behind the economic picture. You can't fake it.

[Cali_Democrat]

3. That is conventional central bankster thinking

Those conventional policies have, up to this point, failed spectacularly. Raising rates when the economy gets better and lowering rates when the economy slows has been the go to policy for the major central banks.

The problem is that lending is still very tight even though interest rates are near zero. The low interest rate environment has failed to spur economic growth and consumer spending by making borrowing easier which is the main goal of low interest rates.

In fact, low interest rates may actually hurt consumer spending by punishing savers who earn interest on their savings.

See here:

http://www.chicagotribune.com/business/breaking/chi-low-rates-squeeze-savers-and-may-hold-back-economy-20110826,0,5228280.story?track=rss

It's time that we try something different because our current monetary policy has failed spectacularly.

[themaguffin]

4. it's the low interest savings partially that made me think this as

my parents are near retirement and the events of the past years have seriously hurt their retirement savings and the lack of interest isn't helping them either.

[bemildred]

2. Jobs are a lot more direct.

Interest rates are a "trickle down" sort of approach at best.

[frazzled]

5. No, a small rise in inflation would

Though I'm no expert in economics, this seems to be what most of the reliable economists are saying. It's just something that sounds very unappealing to the public, and thus is a political third rail (just as a lower dollar is helpful in a recession, but people think it sounds really bad).

[abelenkpe]

6. Raising interest rates would encourage individual savings

Wage inflation would encourage consumer spending. (Not going to happen)



Either way didn't the Fed recently say they were determined to keep rates low?