The Fight Against Inflation Intensifies

L Heslop

Inflation is at a 40-year high. The Federal Reserve is doing everything possible to lower this inflation rate. A recent move saw the Fed raise benchmark interest rates by half a percentage point. Though the increase appears small, it is the most significant hike in two decades. Economists describe it as the most aggressive step yet against inflation. (source)

Jerome Powel is the Federal Reserve Chairman. Powel said, "Inflation is much too high, and we understand the hardship it is causing. We are moving expeditiously to bring it back down. We are strongly committed to restoring price stability."

The federal fund rate affects how much banks charge each other for short-term lending. This rate also gets tied to a variety of adjustable-rate consumer debt. The central bank has other plans besides raising the interest rate. It stated the intention to reduce asset holding on its $9 trillion balance sheet. (source)

The market anticipated this move by the central bank. But there is still volatility. This rate hike will elevate the federal fund rate to 0.7-1%, and current market pricing can have the rate rising to 2.75%-3% by year-end. The market anticipates the central bank will continue to hike rates aggressively in the coming months. (source)

But Powel says, "Seventy-five basis points is not something the committee is actively considering. The American economy is very strong and well-positioned to handle tighter monetary policy."

What do you think about this?

Share your thoughts in the comments and feel free to share this article on social media and with your friends and family. If you'd like more content like this, you can follow me on Newsbreak.

Disclaimer: This article is only for educational and informational purposes.

Comments / 0

Published by

Copy Editor | Business, economics, weather, and housing stories

N/A
554 followers

More from L Heslop

Comments / 0