11/14/2023 0 Comments Fed wrise interest rates![]() ![]() Over the past year, consumer prices have surged 7 percent, the fastest pace in nearly four decades. This week’s Fed meeting, which will end Wednesday with a policy statement and a news conference with Chair Jerome Powell, comes against the backdrop of soaring inflation and an economy gripped again by a wave of COVID-19 infections. The tech-heavy Nasdaq has tumbled more than 10 percent from its peak, amounting to a full-blown “correction.” Last week, a sell-off sent the S&P 500 index into its worst weekly loss since the pandemic erupted in March 2020. Spooked by the prospect of higher rates, investors have been dumping stocks with abandon. When the Fed boosts its short-term rate, it tends to make borrowing more expensive for consumers and businesses, slowing the economy with the intent of reducing inflation. “The consensus is that the time has come to move,” said Roberto Perli, chief economist at Cornerstone Macro and a former Fed staffer. In this view, high prices mostly reflect snarled supply chains that the Fed’s rate hikes are powerless to cure. They argue that numerous rate hikes would risk causing a recession and wouldn’t slow inflation in any case. Others say they worry that the Fed may act too aggressively. ![]() Some economists have expressed concern that the Fed is already moving too late to combat high inflation. How many times, for example, should the Fed raise rates this year? When should it start shedding its enormous stockpile of bonds, a move that would contribute to tighter credit? And how should the Fed respond if inflation eases later this year, as many officials expect, yet still remains far above its 2 percent annual target? But after that, their policymaking will become more complicated and could sow internal divisions, especially as a number of new officials join the Fed. The Fed’s challenges will get only harder from there.Īmong the central bank officials, there is broad support for a rate increase - one that would come much sooner than the officials had expected just a few months ago. WASHINGTON (AP) - With inflation punishing consumers and threatening the economy, the Federal Reserve this week will likely signal its intent to begin raising interest rates in March for the first time in three years. ![]()
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