The U.S. stock market and the economy could get hit with a rude of awakening if the Federal Reserve raises rates too quickly, according to former BB&T CEO John Allison.
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“The market and the economy to some degree has largely discounted the interest rate rises that the Fed anticipates making,” Allison said on Monday to FOX Business’ Connell McShane on “Cavuto: Coast-to-Coast.” “The real issue is when the rates rise faster or higher than people expect and I think the long-term challenge here, it’s not that long term, is rising interest rates are going to raise government deficits.”
The Fed in September raised interest rates for a third time this year and signaled it would raise borrowing costs again in December.
The Fed raises interest rates to prevent the economy from growing too fast and as a result causing inflation. And Allison said raising rates would substantially raise the government deficit and would “rattle the markets” and economy.
“I would guess within the next year you start seeing the actual numbers and rates get higher and stay higher,” he said. “It’s going to be hard for the market or economy to ignore the implication of a much more expensive level of debt in the U.S. economy.”
President Trump earlier this month slammed Federal Reserve Chairman Jerome Powell over raising interest rates too fast. But in Allison’s opinion, “The president’s comments will have no impact.”