Tighter Credit Unlikely To Choke Off Expansion
The recent turmoil on Wall Street reflects the simple fact that interest rates are rising rather than falling for the first time in nearly a decade, forcing speculators and investors to recalibrate the assumptions on</br></br>But the consensus among economists is that the rise in rates will not choke off the current expansion because1 the economy is strong enough to overcome it.</br></br>"IkTear term, these higher interest rates and market gyrations are scary for everyone,Û said Allen Sinai, chief economist for Lehman Brothers Inc. ÛÏBut in point of fact, the amount of damage to the economy should not be great.Û</br></br>ÛÏThe rate of growth in the economy is determined by a number of factors, including incomes, exports, jobs,Û said Gordon Richards, chief economist of the National Association of Manufacturers. "And right now those factors are providing the econo-, my with enough momentum." This calm in the face of rising rates may seem somewhat at odds with recent economic history. Last year, after all, falling interest rates were widely credited with getting the economy out of low gear. WouldnÛªt a rise in rates now have the opposite effect?</br></br>Not exactly, say economists. How much a rise in interest rates will hurt the economy depends in large part on what is causing it. And in this case, the cause is likely to be benign.