When was the last time interest rates were a topic of discussion regarding the U.S. economy? It was probably in 2007 or 2008 when the financial crisis was just emerging. But the recent rise in rates shouldn’t be a cause for undue concern. In fact, it signals that the economy is in much better shape.
That’s not to say that the interest rate policies of the Federal Reserve have not been in the news over the past five years. The Fed has been at the forefront of trying to hold interest rates down, using a variety of old and new techniques to push short- and long-term interest rates down and hold them down. But that’s the point. Over the past five to six years the only driving focus of interest rate policy in the U.S. has been to hold down all interest rates as much and as long as possible. Chief among these new techniques has been the outright purchases of long-term bonds. Now, for the first time since 2007, the Fed is discussing openly the need to allow interest rates to rise.