Tags: Feldstein | Fed | rates | financial

Feldstein: Fed Has to Hike Rates 'Without Upsetting Apple Cart'

By    |   Friday, 14 November 2014 12:53 PM

Harvard economist Martin Feldstein is impressed with the economy's growth, but that doesn't mean we're out of the woods yet, says the chairman of the White House Council of Economic Advisers under President Reagan.

"The economy has finally broken out of the low growth that we've had for the last several years," he told CNBC. GDP expanded 3.5 percent in the third quarter and 4.6 percent in the second.

"I think things will be good for the year ahead," Feldstein said. "But now the Fed's big challenge is to get interest rates back up to normal levels without upsetting the apple cart."

Economists' consensus is that the Fed will begin raising rates around mid-2015.

Feldstein hopes the economy and financial markets will escape any pain from the Fed's ultimate tightening of monetary policy.

"But I worry that these exceptionally low interest rates are driving investors and lenders to take all kinds of risks to pick up some yield. And that's how we can get in trouble again," he said.

Inflation isn't the issue. "I'm more worried about this financial risk taking that's going on. If the economy slows down more than we expect, a lot of these high-risk loans could get in serious trouble," Feldstein noted.

"And if the economy picks up speed and interest rates rise enough, well, then some of those borrowers are not going to be able to repay their loans. So it's a kind of risky balance that's the result of having this long period of very low interest rates."

Meanwhile, David Stockman, White House budget director under Reagan, is aghast at central bank easing programs across the globe.

"Each and every day the central banks in the world get more out of control fueling a bubble the likes of which we have never seen in modern times, if ever," he told Fox Business Network.

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
Finance
Harvard economist Martin Feldstein is impressed with the economy's growth, but that doesn't mean we're out of the woods yet, says the chairman of the White House Council of Economic Advisers under President Reagan.
Feldstein, Fed, rates, financial
311
2014-53-14
Friday, 14 November 2014 12:53 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
America's News Page
© Newsmax Media, Inc.
All Rights Reserved