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The New Year and Interest Rates

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CFO CURRENCY : By Jason Haley

What stands to happen with interest rates in 2015? What  are the Federal Open Market Committee’s thoughts on the issue? A financial advisory strategist offers his take on what to expect – and not expect – in the New Year.

I like stories with unexpected twists – so let me tell you what happened a few weeks ago. A friend handed me an article with the headline, “Why are Americans so gloomy, fearful, and even panicked about the current economic slump?”

The article cited the President as saying, “I haven’t really been able to sort out exactly why there has been this degree of pessimism.” He pointed out that inflation is at the lowest level in years and home mortgages are available at interest rates not seen since 1974. The unemployment rate is not nearly as severe as it was at the depth of the 1981–1982 recession, and in the past, the contraction in gross national product was far less sharp. The article continued that Americans have been traumatized by layoffs and disillusioned with the American Dream of rising prosperity. Further, it indicated that when the recession is over, most economists believe it unlikely that people will go back to “business as usual,” citing a sea of change in human behavior that occurs only once every few decades. The article quoted many economists who believe the United States will face years of modest growth as consumers and companies work off the vast debt they have assumed.

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