After seven years of being under intensive care, Fed chief Janet Yellen doesn’t believe the U.S. economy is ready to leave the hospital just yet.
That’s why Yellen and her colleagues at the Federal Reserve decided last week to keep its benchmark rates at near 0%.
They might be right. The economy is hardly going gangbusters and there are real threats from China’s slowdown.
But some feel the Fed is coddling the economy by giving it more care than it needs. They argue emergency-level rates and Fed indecision are actually hurting confidence among consumers, investors and CEOs.
That’s why they believe a rate hike could actually boost the American recovery by reassuring the public, encouraging borrowing at cheap levels and generating some income for struggling savers.
“One particularly sad irony in all of this is that the Fed’s inaction may run entirely contrary to its own goals,” David Kelly, chief global strategist at JPMorgan Funds, wrote in a note to clients.
“By holding rates low, I believe the Fed is continuing to suppress economic growth and demand,” he said.