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Tags: peter morici | federal reserve | interest rates | inflation

Peter Morici: Hike Rates Now to 'Get Ahead of Inflation'

By    |   Friday, 18 November 2016 07:33 PM EST

The United States “can certainly bear” higher interest rates and it’s time for the Federal Reserve to embrace a hike so the nation “can get ahead of inflation,” Peter Morici, a syndicated columnist and economist at the University of Maryland, tells Newsmax TV.

“Interest rates have been low for too long and it encourages a lot of speculation and a lot of asset bubbling," Morici told Bill Tucker on "The Steve Malzberg Show."

“We can certainly bear somewhat higher interest rates. I mean inflation's running at better than 2 percent a year now, the core rate was up 2.2 over year over year and there's no reason why we can't have interest rate at 2 to 3 percent. I wouldn't jump them there overnight, but certainly we've had interest rates at 3 and 4 percent and the economy's been healthy,” said Morici, who is also a Newsmax Finance Insider. 

 

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Most stock-market experts widely expects the Fed to hike rates when it meets on Dec. 13-14. The cost of borrowing money was last increased in December 2015, the first such move in more than nine years.

“Setting a price of zero for anything encourages its overuse. Among wealthy people, they're borrowing too much,” he explained.

For their part, even Fed officials are starting to prepare the public for a rate hike, Reuters reported.

James Bullard, a voting member of the U.S. central bank's rate-setting committee, said the Federal Reserve will raise U.S. interest rates in December barring a major shock, such as global market volatility or bad U.S. jobs data.

Fed Chair Janet Yellen said a rate increase was probably warranted "relatively soon" but cautioned there would only be gradual increases in the rate over time.

As far as Morici is concerned, there's really no single argument to keep rates at or near zero.

“I don't buy the notion that higher interest rates give you stagflation,” commonly defined as a condition of slow economic growth and relatively high unemployment

“One of the reasons for raising interest rates is that inflation is heating up. Wages are rising and things of that nature, which is true,” he said. “It is starting to heat up. You've got to get ahead of inflation. If you wait until it's where you don't want it to be, then it takes off and goes on a life of its own," Morici explained.

"So I'm not particularly concerned that raising rates by a percentage point over the next two years is going to do much harm at all. In fact, with Donald Trump coming in and all the spending he wants to do, long rates are going to go up on their own. It's just a matter of keeping short rates where they belong as well,” Morici said.

Morici isn't alone in his feeling that the Fed should hike rates at its next meeting.

Financial guru and Donald Trump adviser Wilbur Ross told Newsmax TV that he thinks the Federal Reserve will finally raise interest rates at its next meeting.

The WL Ross & Co. chairman and CEO told "Newsmax Prime" host J.D. Hayworth that the nation's central bank was "wrong" and actually created more problems by delaying a hike and keeping investors in suspense for most of the year.

 

“I think that the rates will go up in December. I can't judge whether the dawdling that they did was politically motivated or not, but whatever the motivations, it was wrong,” said the private equity billionaire reportedly under consideration for one of the Trump administration's top economic roles.

(Newsmax wire services contributed to this report).

Peter Morici is an economist and business professor at the University of Maryland, and a national columnist. He tweets @pmorici1

To read more from Morici, CLICK HERE NOW.

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StreetTalk
The United States "can certainly bear" higher interest rates and it's time for the Federal Reserve to embrace a hike so the nation "can get ahead of inflation," Peter Morici, a syndicated columnist and economist at the University of Maryland, tells Newsmax TV.
peter morici, federal reserve, interest rates, inflation
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2016-33-18
Friday, 18 November 2016 07:33 PM
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