They tried to deny it for months, but now everybody knows we have an inflation problem. The president, Congress and all of the central bankers at the Fed are trying to find ways to solve this problem. But as host Mike Maharrey explains in this episode of the Friday Gold Wrap, all of their solutions are the equivalent of dumping buckets of water on a drowning man.
The Federal Reserve recently delivered the largest interest rate hike since 1994 in an effort to combat inflation that turned out to be not so transitory.
Economists and policy wonks continue to debate the effectiveness of these rate hikes in the face of historically high inflation, but what do they mean for you? Should you care about rising interest rates?
Here are three ways Fed rate hikes will impact your wallet.
After a weak swipe at inflation at its May meeting, the Federal Reserve delivered the biggest rate hike since 1994 at its June FOMC gathering. But is it enough to tackle persistently red-hot inflation?
Ron Paul doesn’t think so. He notes that the recent rate hikes have only raised rates to the level they were before the pandemic.
The Federal Reserve cannot increase rates to anywhere near the level they would be in a free market because doing so would increase interest payments to unsustainable levels for debt-ridden consumers, businesses, and the federal government.”
After last week’s FOMC meeting, Federal Reserve Chairman Jerome Powell claimed that a “soft landing” was still possible. In other words, he thinks the central bank will be able to slay red-hot inflation without tipping the economy into a recession.
Is this feasible? Or is it a fairytale?
A 75 basis-point rate hike wasn’t even on the table a month ago. It appears that the central bankers over at the Fed were crawling around under the table because they found a 75-basis point rate hike.
The Fed went big at the June FOMC meeting in response to hotter-than-expected May CPI data just a week earlier. Jerome Powell admitted that Fed members were “surprised” but another big spike in prices.
So, what’s the plan here? Well, by all indications, there isn’t one.
The Federal Reserve just gave us the biggest interest rate hike since 1994. A month ago, we were told a 75 basis-point hike wasn’t on the table. It almost seems like the central bankers are winging it. Or as Friday Gold Wrap podcast host Mike Maharrey puts it, it’s like they’re playing darts while wearing blindfolds. In this episode, Mike breaks down the rhetoric coming out of this Fed meeting and speculates on what might be next.
The Federal Reserve doesn’t have a very good track record. It was wrong about transitory inflation. It was wrong about peak inflation. And it’s almost certainly wrong in thinking the economy is strong enough to withstand tighter monetary policy to fight inflation.
But President Joe Biden trusts the Fed. The cornerstone of his inflation-fighting plan is to recognize the central bank “has the primary responsibility to control inflation.” He took a shot at President Trump for “demeaning” the Fed. On the other hand, Biden said he will respect the Fed and its independence.
Inflation wasn’t transitory.
And inflation hasn’t peaked.
It’s more like peak inflation was transitory.
The Consumer Price Index (CPI) data for May came out this morning. The projection was for another hot headline number but some relief in core CPI. This would seem to indicate we’ve passed peak inflation. In this episode of the Friday Gold Wrap podcast, host Mike Maharey explains why “good news” in the CPI data would be bad news for inflation. Then he reacts to the data in real-time. (Hint — it wasn’t good news.)