"We believe that the Federal Reserve has to carry on with a progressive increase in interest rates as a consequence of the American economy"

Rodrigo Rato's statement highlights a belief in the necessity for the Federal Reserve to continue raising rate of interest. This perspective suggests a nuanced understanding of macroeconomic conditions and financial policy. Let's interpret the statement in greater information:

Rato's focus on a "progressive increase in rates of interest" suggests a steady method to monetary tightening up. This gradualism is crucial for decreasing prospective disruptions in financial markets and the broader economy. An abrupt increase might surprise the system and negatively impact economic development, consumer self-confidence, and financial investment, whereas a consistent and foreseeable rise allows services and consumers to adjust their expectations and strategies accordingly.

The phrase "as an effect of the American economy" suggests that the state of the U.S. economy is the driving force behind this policy recommendation. It indicates that the economy is at a phase where greater rate of interest are necessitated, potentially due to aspects such as robust growth, low joblessness, or increasing inflation. In times of economic growth, interest rate walkings can help prevent the economy from overheating, which might lead to inflationary pressures. By increasing borrowing expenses, the Federal Reserve aims to moderate consumer spending and service investment, therefore keeping inflation in check.

Furthermore, a rise in rate of interest can also strengthen the nationwide currency by making dollar-denominated assets more attractive to investors. This element can be pivotal for balancing trade deficits by making imports less expensive and exports more costly. However, it's essential to think about potential downsides, such as increased loaning expenses resulting in lower levels of usage and investment, along with possible unfavorable effect on stock and real estate markets.

In essence, Rato's declaration shows a belief that a well-managed increase in rate of interest is necessary for sustaining economic health and stability. It highlights the complex relationship in between financial policy and economic conditions, highlighting the cautious balancing act reserve banks need to perform to preserve economic balance.