Despite its current inclination, the Federal Reserve will implement additional rate hikes to correct the stress the average consumer is still feeling in the economy.
The United States Federal Reserve has increased its interest rate by 25 basis points (0.25%) through the Open Market Committee (FOMC). The rate hike was expected and was implemented despite recent bank failures, leading to a crisis of confidence in the financial sector.
The days leading up to the conclusion of the FOMC policy meeting were filled with a lot of speculation with economists and analysts mulling over which direction the Fed would move based on current realities. While the banking crisis requires a quick fix through monetary policies from the Fed, adopting a 25 basis point hike is confirmation that the Fed is choosing economic growth over banking turmoil at this time.
The rate hike marked exactly one year after the Fed began raising interest rates as sky-high inflation reached a 40-year high during this period. The effect of the increase in the rates made about 9 times has started showing itself in recent times. However, the difference in the inflation figures is still a huge concern as Americans grapple with the high cost of living across the board.
Whether the experts at the Federal Reserve hold interest rates or not, given how dire the situation is at the moment, won’t make much difference.
“They are rightly realizing that these are dire economic times,” Said Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chairman of the White House Council of Economic Advisers, who noted that the current inflationary crisis has generally weakened the purchasing power of the dollar.
Inflation is still pegged at around 5.4%, according to the Fed’s preferred gauge, which is much higher than its 2% target as its benchmark.
Interest rate hikes, are we done yet?
The current actions of the US Federal Reserve regarding the scheduled increase in the interest rate do not in any way signal the end of its aggressive moves. One stinging fact is that Americans are paying more for goods and services, which means there is systemic inflation that still needs to be tackled across the board.
Since rates began rising, rates on credit cards that have a direct correlation with the fed funds rate have increased by at least 20%. The rate on credit cards is at its all-time high (ATH) as it is higher than the 16.34% recorded in a year-ago period.
Aside from credit cards, rates on mortgages now average 6.66%. It also implies that potential home buyers have lost a lot of purchasing power in the last one year.
Despite its current inclination, the Federal Reserve will implement additional rate hikes to correct the stress the average consumer is still feeling in the economy. According To analysts at the US investment banking giant Goldman Sachs Group Inc (NYSE: GS), is on track for at least three more interest rate hikes in May, June and July, respectively.
Benjamin Godfrey is a blockchain enthusiast and journalist who loves to write about real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies drives his contributions to well-known blockchain-based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
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