Interest rate whispers every which way

Stacey Vanek Smith Aug 14, 2007
HTML EMBED:
COPY
U.S. Federal Reserve Building Win McNamee, Getty Images

Interest rate whispers every which way

Stacey Vanek Smith Aug 14, 2007
U.S. Federal Reserve Building Win McNamee, Getty Images
HTML EMBED:
COPY

TEXT OF STORY

Doug Krizner: And for investors in the U.S. today, a piece of critical news: This morning’s report on July producer prices, which will be followed tomorrow by the report on consumer prices. Here’s Stacey Vanek-Smith:


Stacey Vanek-Smith: If this week’s numbers show prices are on the rise, that would be a sign of inflation, which could trigger the Federal Reserve to raise interest rates.

Wall Street wants the Fed to lower interest rates. The Fed has already said it won’t, and that’s just fine with Mesirow Financial’s Diane Swonk.

She says the economy is actually doing fine. Lowering interest rates would lower borrowing costs and would make investors feel better, but, she says, that’s exactly why the Fed shouldn’t do it.

Diane Swonk: We’ve just cut a whole group of people out of the market who are not getting credit. Who did we cut out? We cut out people who didn’t put money down on their house and who were sold mortgages that they couldn’t afford in the first place. I don’t think we want to give those people credit.

Swonk says if the Fed lowers interest rates just as the economy is picking up steam, it could create a financial bubble and set us up for a crash.

I’m Stacey Vanek-Smith for Marketplace.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.