Don't change the rate!
Alan Greenspan and his colleagues on the Federal Open Market Committee will be meeting tomorrow to talk about raising the short term rate about a quarter of point. However, this is a very bad idea:
- Oil prices are close to hitting $45 a barrel and could cause another spike in gas prices. An increase in gas prices has a negative effect on businesses, and many will probably hold off spending in anticipation of raising gas prices.
- Unemployment numbers are still not great. The last two unemployment reports have fallen short of analyses expectations.
- Retail sales in June were below analyses expectations.
The Federal Open Market Committee should just keep the rates as they are and issue a warning that rates may increase in September. Remember its always easy to cool off a hot economy, but it takes a while to heat up a cool economy.