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EconoMeter panel: Interest rates on the rise in 2015?

Roger Showley, U-T SAN DIEGO

Friday, July 18, 2014

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Kelly Cunningham, National University System
Answer: YES

Low interest rates resulted from the Fed's QE program. The economy, dependent upon the low rates, caused stock prices to surge with low borrowing costs inflating corporate profits. Real estate was also lifted by the artificially low rates and institutional investors are using easy financing to buy single-family homes and rent to residents no longer able to afford buying. As the Fed stops bond buying, rising interest rates will severely pressure markets and banks will absorb considerable losses on Treasury and mortgage-backed bond portfolios. Pressures on the dollar will likely trigger an exodus of foreign investment and significantly increase import prices.