Nearly Half of Investors Agree With Higher Interest Rate Threshold

This week’s Sentiment Survey special question asked AAII members what they thought about Federal Reserve chairman Jerome Powell having a higher threshold for raising interest rates than for cutting them. Nearly half (48%) of the respondents believe that the chairman’s actions are appropriate given global market conditions. On the other hand, 30% of respondents disagree with Powell. Many in this group cite inflation concerns and/or believe that rates are inappropriately low given the current U.S. economy. A small group of respondents (13%) believe Powell is caving to political pressure.

Here is a sampling of the responses:

• “It suits market expectations, so it’s good for the markets. But I think the Fed should gradually raise rates to have room for lowering in recession scenarios.”
• “I have no idea about Powell’s threshold for changing rates. I’m in favor of just letting the economy alone. Let it move under its own power.”
• “It makes sense when the U.S. already has the highest short-term rates of the world’s advanced economies.”
• “He’s influenced by the politics around him. Which, in the Oval Office and elsewhere, favor incurring low-cost debt to finance ventures and pumped economic indicators.”

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