The Federal Reserve increases its interest rate by three quarters after noticing that interest rates controlled price hikes
In recent months, the public view of the economy has fallen massively after the series of interest hikes and the struggles and pain that American households are experiencing these days. In addition to that, last week’s CPI report suggests that inflation is peaking, and it might not go down any time soon. As a result of this existent pressure, the policy makers decide on Wednesday to lift their interest rates by three quarters, which are the highest interest hikes since 1994.
According to the Fed chairman, recent reports had proved that interest hikes had turned negative to control price hikes.
Over the past 100 days and since the start of the Russian war, food and energy prices have risen to high records, which has put investors in a permanent panic state.
Despite the fears and the economic threats that the global economy faces, the FEd remains solid when it comes to its plan to bring inflation down to 2%.
Meanwhile, the average American consumer is starting to feel the heat and feels that inflation is not going away any time soon.
The unemployment rate is one factor among many that determine the state of any country’s economic health. As for the US, the Federal Reserve believes that by the end of this year, the unemployment rate in the US will be estimated at 3.7%. On top of that, and according to the high inflationary pressure and the monetary policy, it’s more likely that the unemployment rate will reach 3.9% by the end of 2023. That goes back to the fact that the US is far away from an economic soft landing, and it’s much more likely that interest hikes will cause some absorbed pain.
That means that even with the enormous efforts by the Federal Reserve and the White House, avoiding a recession is not an option now.
Speaking about the president’s house, Joe Biden today called refiners oil producers and urged them to produce more oil. According to Biden, the high-profit margins of refiners of oil are hiring the consumer to a large degree.
Petrol prices in the United States reached a new high of $5 per gallon on Wednesday, raising the red flag for the Democrats’ House.
As we head into election season, Biden calls on oil and petrol companies to produce more, which is expected to help cool down the high-profit margin and bring petrol prices to their normal levels.
Arguably, political power in the United States is shifting, with both Democrats and Republicans using current economical data to win the American vote. Inflation is one card that Republicans used to win this time since that Mai’s inflation rate reached 8.6%, a 0.3% increase compared to April’s CPI report.
In terms of the future outlook, economists believe that interest rate hikes might control price hikes, but that will come with a cost. Bowring will become scarcer and more expensive, and mortgage rates are expected to reach new highs in the coming weeks.