Amid record inflation, the Fed could issue a major interest rate hike

As Americans struggle every day with 40-year high inflation, gas and food prices, the Federal Reserve is meeting this week to consider what to do.

At the Fed meeting, which is due to end on Wednesday, a 0.5% hike is likely, according to UKTN.

But it’s the anticipation of what’s next in July that has market pros worried: the possibility of a major rate hike not seen in years. Some are betting on a rise of 0.75% or even 1%.

A 1% hike hasn’t been made since the 1980s.

Now things get interesting…

The market is crashing, panic is starting to set in, and the Fed has a meeting in 24 hours. If this was 2018, you would see a pivot. But we are in 2022 with inflation of 8.6%. (And still rising)

They do not have the choice. Buckle up.

—Stephen Geiger (@Stephen_Geiger) June 13, 2022

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No good news

The consumer price index climbed 8.6% from a year ago, and from April to May alone, it rose 1% more. Quite different from the experts’ predictions for the CPI to jump just 8.3% and rise 0.7% month-over-month. This is the fastest rise in inflation since 1981.

The producer price index, which measures prices received by manufacturers, rose 10.8% over the past year.

In short, inflation is very, very bad right now. Hence the calls for unusually aggressive interest rate hikes at the Fed.

As for the “experts” who have a huge influence on the economy, they don’t seem to quite understand what is going on.

Last month, Fed Chairman Jerome Powell dismissed the possibility of a 75 basis point hike, saying, “A 75 basis point hike is not something the committee is actively considering.”

On The Five’s New Year’s Eve special, my prediction for 2022 was this: The Federal Reserve, trying to fight runaway inflation (raising rates and destroying money), would cause the burst asset bubbles and the collapse of asset prices. Whammo.

— Dagen McDowell (@dagenmcdowell) June 13, 2022

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What Really Affects Americans

The inflation that bureaucrats are trying to contain by changing interest rates is not pretty and is not getting better.

A trip to the grocery store is up 11.9%. Do you want to take a break from cooking and decide to eat out? This is an increase of 7.4%. The price of a gallon of gasoline increased by 48.7% and fuel oil increased by 106.7%.

To date, the average national gas price is $5.01.

The wider picture is not better. Morgan Stanley economists have expressed concern about the possibility of impending stagflation, the end result of high inflation and a stagnant or contracting economy. It could also affect a stock market already on a rollercoaster ride.

Biden blames Putin for inflation. So now we have to find out how the hell Putin broke into the Federal Reserve and printed trillions of US dollars!

— Nick Freitas (@NickForVA) June 8, 2022

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What does all this mean?

A significant interest rate hike from the Fed affects, well, anything with an interest rate. Things like savings and bonds generate higher interest payments. But as interest rates climb, expect to pay more for things like credit card bills and mortgage payments.

Higher interest rates also affect things like refinancing an existing mortgage or paying off student loans. Larger items will also cost more as mortgage rates and car loan rates rise. As most know, even a small change in interest rates on a major purchase can mean a lot of money down the line.

Rising rates make borrowing more expensive in general, even affecting the liquidity of things like stocks and even cryptocurrency.

But despite all the bad economic news and forecasts, last week, in a remarkable show of disconnection with the average American, White House press secretary Karine Jean-Pierre insisted that “the economic plan of the president, as we see it, is work.”

The Federal Reserve’s attempt to contain the highest inflation in decades will end in a recession, according to Bloomberg.

– unusual_whales (@unusual_whales) June 14, 2022