Irrespective of its current leanings, the Federal Reserve will implement additional rate hikes to correct the strain that is still being felt in the economy by the average consumer.
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 it was implemented 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 a lot of speculation with economists and analysts highlighting which direction the Feds will thread based on current realities. While the banking crisis requires prompt fixing through the monetary policies from the Fed, the adoption of the 25 basis point hike is a confirmation the Fed is choosing economic development over the banking turmoil at this time.
This rate hike marked exactly a year since the Fed started hiking interest rates as sky-high inflation topped a 40-year high during this period. The rate hikes which have been introduced about 9 times have only started having an effect in recent times. The difference in the inflation figures is, however, still of huge concern as Americans are grappling with a high cost of living across the board.
Whether or not the Federal Reserve experts have paused the interest rates will not have made any much difference considering how dire the situation is at this time.
“They are right in feeling these are dire economic times,” said Tomas Philipson, a professor of public policy studies at the University of Chicago and a former acting chair of the White House Council of Economic Advisers who noted that the current inflationary 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%, a significantly higher level compared to the 2% target it has as its benchmark.
Interest Rate Increase, Are We Done Yet?
The current actions of the US Federal Reserve with respect to the scheduled increment in the interest rate do not in any way connote an end to its hawkish moves. There is a stinging fact that Americans are paying more for goods and services, implying there is systemic inflation that must still be dealt with across the board.
Since the rate hikes began, the associated rates on Credit Cards have a direct correlation with the Fed Fund Rate have also increased by at least 20%. This rate on credit cards is at its All-Time High (ATH) as it is up from the 16.34% recorded in the year-ago period.
Besides credit cards, the rates on mortgages 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 past year.
Irrespective of its current leanings, the Federal Reserve will implement additional rate hikes to correct the strain that is still being felt in the economy by the average consumer. According to analysts at American 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 journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
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Source: https://www.coinspeaker.com/fed-increased-interest-rate-0-25/