Fed Raises Interest Rates (Again): A Christmas Gift for Bankruptcy Professionals?

December 14, 2017Alerts The Bottom Line 11

The Federal Reserve voted Wednesday, December 13 to raise short-term interest rates for the third time this year. That means the federal funds rate, which helps determine rates for other borrowing, will now hover in a range of 1.25 percent to 1.5 percent. Overall, still in historically low territory.

This is the fifth time the Fed has lifted rates since the 2008 financial crisis. And it has signaled it will stay on course next year, with three rate hikes planned in 2018 and two in 2019. Expect a slow climb towards more normal levels of around 3 percent.

Implications for the Economy… And Restructuring Professionals

Widely hailed as a show of continued optimism about the U.S. economy, interest rate hikes are uniquely celebrated among one group of people.  Bankruptcy and restructuring professionals! Why? Because, although the rate hikes have thus far not caused noticeable pain in the economy, rate hikes tend to moderate economic growth.

That leads me to wonder, how strong is our economy and what impact are the continuing rate hikes likely to have? The Fed cast its decision as a positive sign of worldwide economic momentum as employers keep hiring, consumers keep spending, and inflation remains (oddly) low.  And it noted that the imminent tax bill is a key driver of its own rosy forecast. Although the Fed stopped well short of forecasting the 4 percent growth Republicans have promised, it expects a more modest, albeit uncertain, 2.5 percent increase in growth from the tax plan.

For more information about this alert or if you have any questions, please contact Mette H. Kurth at 302.622.4209 or [email protected].

This alert originally appeared on the blog, The Bottom Line 11View the full article here.