Mixed Opinions – Interest Rate Hike
At first, many agreed with the Federal Reserve’s decision to hike interest rates. A major economic problem in the form of inflation was hurting not only the US but the global economy. Fast forward a couple of months, and the world has veered in two different directions regarding the issue. The Fed, along with other central banks, has taken a hard-line stance on raising rates rapidly until a dent is made in inflation, while the rest of the world is warning them about the worrisome effects that could occur as a result.
Monday provided us with word from two important Fed officials, one of them being Vice Chairwoman Lael Brainard. She said that the slowdown of the economy will be a unique one because of the rate hikes, but that the Fed will continue to raise rates and keep them high until inflation settles down. This is exactly what people are worried about, but Brainard listed multiple reasons as to why she believes inflation will come down from here. Chicago Fed President Charles Evans gave us more of a specific outlook, saying that the Fed might pause rate hikes when interest rates reach 4.5%, which should be around next March. Keeping this in mind, it solidifies the case for those expecting the Fed to implement a 0.75% rate hike in November. They continued to stress they are worried about overshooting monetary policy and that they are keeping that in mind, but it certainly doesn’t feel that way.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.