The Fed fights inflation when a recession threatens
US interest rates have returned to pre-pandemic levels as the Federal Reserve tries to combat rising inflation rates.
The central bank announced this development on Wednesday in the Federal Open Market Committee. After that 0.75% hike, U.S. interest rates are currently between 2.25% and 2.5%, the highest level since the start of the COVID-19 pandemic.
The Fed’s decision came after the US Bureau of Labor Statistics said the consumer price index rose to a level of 1.5%. The Fed’s move came after the US Bureau of Labor Statistics revealed that the consumer price index hit a record high of 9.1% in June, despite months of efforts by the central bank government to stem rising prices by raising interest rates. The bureau’s report said rising gasoline, housing and food prices were the main factors behind the rise.
The Fed’s latest move comes as more Americans voice fears about rising prices. According to a recent poll, 96% of Americans are “employed” by rising food, gas and house prices.
To fight inflation, the Fed tries to shrink the money supply. It does this by raising interest rates, making it more expensive to borrow money. The 75 basis point hike was widely expected, despite expectations that the central bank could opt for a 100 basis point hike shortly after the release of June inflation data.
The Fed’s effort to lower inflation comes amid uncertainty in global markets and rising fears of a possible recession. US GDP numbers showed the economy contracted 1.6% in the first fiscal quarter, and many economists fear the economy will take a hit in the second quarter.
Historically, a recession is identified by two consecutive quarterly declines in GDP. The second quarter figures are due out tomorrow and the White House appears to have prepped the public for that announcement in advance. Last week, she published an article on the subject, before releasing an interview transcript in which Treasury Secretary Janet Yellen argued that two straight quarters would not indicate the country was in recession because the Bureau of Economic Analysis was “investigating.” “.a variety of data“.