Expert Available to Discuss Fed’s Expected Interest Rate Increase

UCR's Christopher Thornberg highlights how the decision would affect American families on a daily basis

Christopher Thornberg standing on stage giving an economic forecast

Christopher Thornberg

RIVERSIDE, Calif. (www.ucr.edu) — The Federal Reserve is widely expected to raise interest rates for the first time in nine years this week, signaling the end of the Central Bank’s emergency response to the financial crisis and its confidence in U.S. economic growth.

The question on many people’s minds is “What does this mean for me?” Christopher Thornberg, director of UCR’s School of Business Administration Center for Economic Forecasting and Development, is available to speak about what is likely to happen at the Fed meeting and what a rate increase will really mean for most American families.

“The Fed has been pursuing ‘stimulative’ policies since the Great Recession began. The Federal Funds Rate (FFR) has been pegged at functionally zero since the start of 2008 and the Fed is now expected to raise it. But does that mean you and I should care? Well, not as much as the markets seem to. We might even argue that this is largely a non-story for the vast majority of Americans,” Thornberg said.

He continued: “The FFR, which is at the center of Fed interest rate policy, is an obscure number that relates to the cost of lending between banks within the Federal Reserve accounts on a day-to-day basis. It is not a rate that businesses or households will actually ever see on a bill or loan payment slip. The Fed does not directly set bond rates, mortgage rates, the prime rate, or myriad other percentages that are attached to loans in our economy. Market forces set all those rates—basically the supply and demand for lending capital.”

“This isn’t to say the FFR doesn’t have some impact on all these other rates, but the connection is far more obtuse than many realize. Moreover, the Fed doesn’t think the economy is overheated, nor should they. With GDP growth still below 3 percent, stagnant wage growth, and lending that remains subdued, they would think the opposite. This means small moves—which means even smaller changes in the rates you and I care about.”

Media Contact


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Additional Contacts

Christopher Thornberg
Tel: (310) 739-3286
E-mail: chris.thornberg@ucr.edu

Victoria Pike Bond, Director of Marketing & Communications, Center for Economic Forecasting
Tel: (415) 488-7195
E-mail: Victoria.Bond@ucr.edu

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