What prompts the Federal Reserve Board to raise or lower interest rates? Are there any indicators that can help individual investors like me anticipate the moves of the Fed?
Fears or concerns about the economy prompt the Federal Reserve to adjust interest rates. Fear of inflation can cause the Fed to raise interest rates, and fear of recession or economic slowdown prompts the Fed to lower interest rates. Some of the indicators you may wish to keep an eye on are:
- T Producer Price Index (PPI) is an excellent indicator of future price increases or decreases.
- Consumer Price Indexes (CPI) is a survey of housing prices, utilities, consumer products and services.
- Gross Domestic Product measures growth or business activity. (Generally, when GDP is above 3%, it is considered inflationary.)
- Capacity Utilization is a measurement of the rate in which plants and utilities operate as a percent of total capacity.
- Employment and Unemployment Data. As employment figures go up, more employment creates more demand for workers. This results in higher wages, which is considered inflationary.
Fears or concerns about the economy prompt the Federal Reserve to adjust interest rates. Fear of inflation can cause the Fed to raise interest rates, and fear of recession or economic slowdown prompts the Fed to lower interest rates. Some of the indicators you may wish to keep an eye on are:
- T Producer Price Index (PPI) is an excellent indicator of future price increases or decreases.
- Consumer Price Indexes (CPI) is a survey of housing prices, utilities, consumer products and services.
- Gross Domestic Product measures growth or business activity. (Generally, when GDP is above 3%, it is considered inflationary.)
- Capacity Utilization is a measurement of the rate in which plants and utilities operate as a percent of total capacity.
- Employment and Unemployment Data. As employment figures go up, more employment creates more demand for workers. This results in higher wages, which is considered inflationary.
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