Tags: Lawrence Lindsey | Federal Reserve | Rate Hike | Economic Growth

Lawrence Lindsey: Fed Won't Hike Rates Since Growth Has Stalled

Lawrence Lindsey: Fed Won't Hike Rates Since Growth Has Stalled
(Dreamstime)

By    |   Tuesday, 18 August 2015 05:57 AM

Former Federal Reserve Gov. Lawrence Lindsey predicts that the Federal Reserve won’t raise interest rates as widely expected because American economic growth has stalled.

"Looking at the Fed's own behavior, I'd bet they're going to take a pass in September," Lindsey, who also served as director of the National Economic Council for President George W. Bush, told CNBC.

Some analysts say the first rate hike will occur at the next Fed meeting on Sept. 16-17, while others believe it could be December before Fed officials will feel confident enough about the economy. The Fed has kept its short-term interest rate near zero since December 2008.

"I think they should have hiked [already]," Lindsey said, but acknowledged, "We are in a very difficult endgame right now."

Financial markets are in a tizzy as to whether the Federal Reserve will begin lifting interest rates in September or December, but China's surprise yuan tactics have caused some experts to reconsider the central bank's timing.

"I think [the Fed] could have done it painlessly. There's no cause and effect here," he said. "I think they're running the risk of raising and then being embarrassed by a slowdown," he said.

To be sure, he’s not optimistic about economic growth for the rest of the year.

"We are not going to have an acceleration in the second half. I think if anything we're going to have a deceleration. I think ... 1.9 [percent] is probably about right for the the year."

"The Fed is constantly drawing down its estimates for growth this year,"he said. "If they've cut their growth forecasts ... it doesn't seem like a more likely environment in which to lift off from zero. It seems less likely."

Former Rep. Ron Paul, R-Texas, agrees that Fed Chairman Janet Yellen won’t raise interest rates this year.

"She's going to be more hesitant to raise rates because she sees how fragile the global economy is," Paul told CNBC. "She's under the gun," he said. "I could be wrong, but I don't think they are going to raise interest rates," he said.

"Everything is vulnerable, so we're living in very dangerous times," Paul added.

Paul, who ran for president as a Republican in 2008 and 2012, warned that a rapidly slowing Chinese economy adds just another headwind for an already struggling U.S. economy.

"I think there's going to be enough problems existing, whether it's the Chinese precipitating some crisis, or whether it's our economy breaking down," he said.

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Former Federal Reserve Gov. Lawrence Lindsey predicts that the Federal Reserve won't raise interest rates as widely expected because American economic growth has stalled.
Lawrence Lindsey, Federal Reserve, Rate Hike, Economic Growth
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2015-57-18
Tuesday, 18 August 2015 05:57 AM
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