Right now, the U.S. economy isn’t the easiest thing to keep track of.
Between inflation causing prices to skyrocket on everyday materials like food and gas to issues with the overall supply chain, we’re in for a difficult 2022. The Federal Reserve is now expected to raise interest rates for the first time since 2018.
There has been a two-day meeting, which is expected to end today.
The interest rates would be raised by a quarter-point. So, what exactly does this mean for all of us?
At a Glance
- The Federal Reserve is trying to combat the rising inflation rate
- Expected to raise interest rate by a quarter-point for the first time since 2018
- “The degree of uncertainty is extraordinary,” given the reasoning for this new interest rate increase
Well, it’s going to reverse some of the efforts put into place that have helped Americans get through the ongoing two-year-long pandemic. The goal of the Federal Reserve right now is to continue to boost these rates to try to combat the extremely high inflation. There could be five or six more of these quarter-point hikes in the future stretching all the way to 2023.
The Fed may need to raise rates to a certain degree in order to avoid going into a recession. According to CNBC, the Fed must understand certain risks to overall economic health that go into raising rates.
There are several factors that are impacting economic growth at the moment. For starters, the Russian invasion of Ukraine is causing inflation to grow worse by the minute. Gas prices, car prices, food prices, and just about everything else are not looking too hot. Also, the pandemic has surged again in China, which means we are facing a lot more supply chain issues at the moment.
The Federal Reserve is doing what it thinks is best.
“The economy is coming into full employment rapidly and inflation is way too high. You add that all up and that means they’ve got to raise rates. The degree of uncertainty is extraordinary. They told us what they’re going to do. They did that to get rid of the uncertainty,” Jim Caron, a chief fixed-income strategist on the global fixed income team at Morgan Stanley Investment Management, said during the meeting.
The Fed is quickly trying to combat consumer inflation, which was 7.9% in February. Meanwhile, financial markets already have it rough. The stocks are uneasy due to rising interest rates, oil prices are skyrocketing, and food prices are also increasing.
Also on Wednesday, the Fed will give new forecasts for growth and inflation as well as the interest rates. The Fed will possibly hold off on any extreme rate hikes for the rest of this year at least.