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Will US interest rate rise and cause a market crash
20 May 2021 (861 views)

Someone asked for my views about the likelihood of an increase in interest rate in America that could lead to a stock market crash.

I believe that the Fed will allow interest rate to remain low for the immediate future. Their focus is to create employment. There is currently excess capacity that needs to be put into productive use. 

The excess capacity is in the high number of jobless people and many businesses and factories operating at low utilization.

Inflation in America will rise due to the fall in the US dollar. But the Fed will continue to keep interest rate low to achieve full employment.

Here are the key points of a CNBC article on 28 April 2021. 

The Fed on Wednesday declined to let up on its easy money policy despite an economy that it acknowledged is accelerating.

As expected, the U.S. central bank decided to keep short-term interest rates anchored near zero as it buys at least $120 billion of bonds each month

https://www.cnbc.com/2021/04/28/fed-holds-interest-rates-near-zero-sees-faster-growth-and-higher-inflation.html

The stock market is jittery and may drop due to the fear of higher interest rate. But this will be a temporary drop and will recover.

There is another reason for the Fed to keep interest rate low. They want to reduce the cost of financing the deficit of the US Government. They will be prepared to allow inflation to increase - and for the burden to be borne by the people through higher prices brought about by a lower US dollar.

The Fed will increase interest rate after the economy approaches employment, but this will take a long time.

Disclaimer - this is just one person's view. Many people hold differing views. Some expect interest rate to rise sooner. Others (like me) expect interest rate to remain low.

Tan Kin Lian


Will US interest rate rise and cause a market crash
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Someone asked for my views about the likelihood of an increase in interest rate in America that could lead to a stock market crash.

I believe that the Fed will allow interest rate to remain low for the immediate future. Their focus is to create employment. There is currently excess capacity that needs to be put into productive use. 

The excess capacity is in the high number of jobless people and many businesses and factories operating at low utilization.

Inflation in America will rise due to the fall in the US dollar. But the Fed will continue to keep interest rate low to achieve full employment.

Here are the key points of a CNBC article on 28 April 2021. 

The Fed on Wednesday declined to let up on its easy money policy despite an economy that it acknowledged is accelerating.

As expected, the U.S. central bank decided to keep short-term interest rates anchored near zero as it buys at least $120 billion of bonds each month

https://www.cnbc.com/2021/04/28/fed-holds-interest-rates-near-zero-sees-faster-growth-and-higher-inflation.html

The stock market is jittery and may drop due to the fear of higher interest rate. But this will be a temporary drop and will recover.

There is another reason for the Fed to keep interest rate low. They want to reduce the cost of financing the deficit of the US Government. They will be prepared to allow inflation to increase - and for the burden to be borne by the people through higher prices brought about by a lower US dollar.

The Fed will increase interest rate after the economy approaches employment, but this will take a long time.

Disclaimer - this is just one person's view. Many people hold differing views. Some expect interest rate to rise sooner. Others (like me) expect interest rate to remain low.

Tan Kin Lian