U.S Fed is prepared to raise its lending rates but faces uncertainty.

Due to the strengthening of the U.S dollar and because of U.S’s trade war with the world American Federal Reserve is all prepared to raise its lending rate to the Big wall street banks. Usually when there are import tarris levied by a nation, currency of that nation depreciates but the U.S dollar is worthwhile even with the import tarrif presence is because its strong IT (Information technology exports), education services, arms and amunitions exports. USA is currently undergoing a prosperity phase because of very low unemployment, strong currency,

Why does ? the Fed want to increase the lending rates.

To stop the tarrif war maybe. Because if there is no economic growth then the market ought to get open up. See, when the lending rates of the central bank rise. Corporate banks sell the loan at a high price. ie at a higher interest rate. To maintain their profit margins. So it proves as a barrier for upcoming businesses. The one who wishes to start up needs to buy the loan at a higher rate. Thus the market opens up once again.

The uncertainties faced by the Fed.

1. Fiscal policy of the U.S.

If the taxation in the U.S is high then it would be difficult for the Fed to hike its lending rate.

2. Political uncertainty.

If the U.S is at war with the North Korea, it would be very difficult for the U.S Fed to raise its lending rates.

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Published by shreyasshrikant

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