Could A Hike In Prime Rate Be a Good Thing?

We keep hearing about how the Fed is going to hike the interest rates back up, then we hear that no, they’re going to keep the base interest rate, the barometer by which independent financial institutions supposedly raise and lower their individual rates they charge consumers and businesses.

Well, this last time apparently, aside from the speculation by some that the Fed was bound to increase the rates, they did not. They kept them at the near zero rate they have been at almost since the great recession started, back in ’08.

But, what a lot of people don’t realize is that an increase in this “emergency” rate may actually bode well for the US economy. Why? Because an increase into the normal range again is a signification from the Federal Reserve that they think the economy may be turning positive again, and may not need so much help from the Fed to remain stable, in the form of bottom of the barrel interest rates.

It’s essentially a vote of confidence on the American economy, and people may pick up on that. Eventually it will become a sort of self fulfilling prophecy, if you know what I mean, and it may have the desired effect on the economy.

Of course, this is all speculation, but it does make sense that although at first the stock market may go down in response to the news that the rates are going back up, ultimately, it will turn around and to the positive again because of the prospects that it won’t be direly needed like it was in the past when it was instituted.