Financial Planning, Budgeting, and Forecasting: Financial Intelligence Collection (7 Books)

CHAPTER TWELVE

Interest Rates, Inflation, and the Economic Cycle

The next three chapters move outside the realm of income- and employment-driven consumer spending into the world of interest rates and the role of the Federal Reserve Board in managing them. We are in an unusual period of low interest rates and rapidly increasing borrowing in all three major economic sectors: government, business, and consumer. These chapters look at three related but separate subjects:

•Applying the ROCET approach to determine whether interest rates are an effective leading indicator of consumer spending and therefore the economy at large

•The long-term relationship between interest rates and the stock market, and implications for investors for the rest of this ...