When the Federal Reserve meets next year, it may raise interest rates, which have been at very low levels since the recession. To help explain what this means to Georgia consumers, Atlanta radio station WABE spoke with William Lastrapes, an economics professor at Terry.
"The idea is that when that interest rate changes, that feeds through the entire financial system and influences interest rates that everybody can borrow and lend at," said Lastrapes.
Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, will be a voting member of the Federal Open Markets Committee (FOMC) this year. The committee determines how much banks pay to borrow money. So far, the FOMC hasn't said when it’s raising rates, but has hinted action may be in order next year. Many analysts expect an increase some time next summer or fall, according to WABE.
Lastrapes believes it’ll likely be the summer.
"The economy keeps heading in the right direction and that’s why we continue to hear talk about raising target interest rates. If the Fed delays too long it’s going to lead to inflation and distortions down the road so the signs seem to suggest that they have to act," said Lastrapes.
Lockhart is generally seen as a Fed official more inclined to keep rates at or near zero and someone who at this point is not overly worried about preventing higher inflation. But Lastrapes doesn’t expect Lockhart to buck the majority if and when the time comes to raise rates.
"I don’t think Lockhart has distinguished himself as others who are for example are more hawkish about keeping inflation down," said Lastrapes. "I think he will tend go along with the rest of the members of the FOMC."
The full article is available online.