Regardless of its current trends, the Federal Reserve will implement additional rate hikes to address the strain still felt by the average consumer in the economy.
The United States Federal Reserve, through the Open Market Committee (FOMC), has increased its interest rate by 25 basis points (0.25%). The rate hike was as expected and was carried out despite the recent bank failures that have caused a crisis of confidence in the financial sector.
The days leading up to the conclusion of the FOMC policy meeting were filled with much speculation with economists and analysts highlighting which way the Fed will head given current realities. While the banking crisis requires an early solution through the Fed’s monetary policies, the adoption of the 25 basis point hike is confirmation that the Fed is choosing economic development over banking turbulence at this time.
This rate hike marked exactly one year since the Fed began raising interest rates when sky-high inflation topped a 40-year high during this period. The rate hikes that have been introduced about 9 times have only recently started to take effect. However, the difference in inflation numbers is still a cause for great concern as Americans are dealing with a high cost of living across the board.
Whether or not the pundits at the Federal Reserve have paused interest rates won’t have made much of a difference considering how dire things are right now.
“They are right to feel that these are dire economic times,” saying 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 inflation crisis has generally weakened the purchasing power of the dollar.
According to the Fed’s preferred gauge, inflation is still pegged at around 5.4%, significantly higher than its benchmark 2% target.
Interest rate hike, are we done yet?
The current actions of the US Federal Reserve regarding the scheduled interest rate increase in no way connote the end of its aggressive moves. There is a burning fact that Americans are paying more for goods and services, which implies that there is systemic inflation that still needs to be addressed across the board.
Since the rate increases began, credit card rates have a direct correlation to the federal fund rate and have also increased by at least 20%. This rate on credit cards is at its All-Time High (ATH) by exceeding the 16.34% registered in the same period of the previous year.
In addition to credit cards, mortgage rates are now pegged at an average of 6.66%. The implication of this is also that prospective home buyers have lost considerable purchasing power over the last year.
Regardless of its current trends, the Federal Reserve will implement additional rate hikes to address the strain still felt by the average consumer in the economy. According According to analysts at US investment banking giant Goldman Sachs Group Inc (NYSE: GS), at least three more interest rate hikes are underway in May, June and July, respectively.
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Benjamin Godfrey is a blockchain enthusiast and journalist who enjoys writing about the real-life applications of blockchain technology and innovations to drive mainstream acceptance and global integration of emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain-based sites and media. Benjamin Godfrey is a lover of sports and agriculture.
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