Interest rates were kept artificially low during the Obama administration. This resulted in lower interest payments on the national debt, which increased from $7.27 trillion in 2009 when President Obama took office to $14 trillion at the end of fiscal 2016. The current national debt is $16 trillion. Increasing interest rates from 2.25 percent to 2.50 percent increases the amount of money all taxpayers will have to pay as interest on that debt.
Breitbart reported today:
“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2‑1/2 percent,” the Federal Reserve announced. The Fed indicated the possibility of just two rate hikes in 2019.
The Dow Jones industrial average rose leading up to the announcement.
Predictions looked toward a likely rate hike ahead of the announcement and possible signaling to a slowing of potential future rate hikes. USA Today reported ahead of the announcement, “Most Wall Street pros expect the Fed, as it has signaled, to hike its key rate another quarter point to a range of 2.25 percent to 2.50 percent. This would be the fourth increase this year and ninth since late 2015.”
The Federal Reserve is not a government agency. They are supposed to be apolitical, but their actions in recent years bring that into question. Lower interest rates during the Obama administration kept the stock market high, paid dividends to those on Wall Street and any well-connected politicians. It provided the appearance of an okay economy despite decreases in the Workforce Participation Rate and the rapidly shrinking middle class. Since President Trump took office, the middle class is growing, and the Workforce Participation Rate is slowly climbing. This rate increase will increase the amount of money needed to pay interest on the national debt and will be a drag on the economy. I don’t mean to be cynical, but I believe that is by design. The Federal Reserve is part of the political establishment that does not want to see the economic success of President Trump’s economic policies. President Trump is not a member of the political establishment, and it will be more difficult to get rid of him in 2020 if the economy is growing. The rate hikes announced today will put a damper on economic growth. The question will be how much of a damper.