Consumer confidence rebounded in May, but there are signs this data is being driven by wealthier consumers enjoying the spoils of high rates, presenting a...
The main driver of this reading helps explain why other surveys show Americans feel dour about their economic prospects. And it reveals the backward problem facing the Federal Reserve 's interest rate policy.The simplified theory behind raising and lowering interest rates is straightforward — lower rates help the economy grow faster, and higher rates slow the economy down. The last 18 months of US economic experience, however, make the second premise harder to accept right now.
"The rise in confidence was likely fueled by easing gas prices and rising equity prices last month, but the underlying details of the survey reveal that consumer confidence may be easily moving forward," wrote Grace Zwemmer, associate US economist at Oxford Economics, in a note on Tuesday. Pulling this off under normal circumstances is a tall order for any politician. But when the expected outcome of a foundational part of the nation's economic policy has been turned on its head, the task may be out of reach.
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Federal Reserve Interest Rate Conference Board Economic Data Releases Consumer Confidence
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