Fed Plans to Raise Rates as Soon as March to Cool Inflation

[Guard Dad]

Here we go! Glad I'm out of debt.

Fed Plans to Raise Rates as Soon as March to Cool Inflation

The Federal Reserve signaled Wednesday that it plans to begin raising its benchmark interest rate as soon as March, a key step in reversing its pandemic-era low-rate policies that have fueled hiring and growth but also escalated inflation.

www.newsmax.com

 

[cptlo]

No!!!!!!!!!!! Wait until at least May after I hopefully sell my house!

 

[Captain Rhett Butler]

Jimmy Carter 2.0...

 

[Boss 302]

Jimmy Carter 2.0...

The Carter administration thought raising interest rates would reduce inflation. It increased inflation and killed the American auto industry.

 

[J-man]

You mean we still have 2 months to go out and spend money before it’s gone? Yee Doggie!!!

 

[The Sound Guy]

The Carter administration thought raising interest rates would reduce inflation. It increased inflation and killed the American auto industry.

Well, from my understanding, (not an econ major, just stayed at a Holiday Inn a few years ago) it goes with the idea that inflation has a base cause of too much money chasing after too few goods. By raising the raising the rates, money will go to paying interest (to the govt in the end, since a lot of the money is borrowed from the fed) reducing the money supply and causing prices to stop rising when there is no money to pay the extra.

The economy had just been holding its own with the low rates, but the billion $$$ giveaways in the Covid packages dumped way too much cash just as goods were drying up due to covid shutdowns. My thought is that given time and congress avoiding another giveaway, (like BBB) and the damn Covid bug going away, we would have recovered. However, with Covid hanging around, something may be needed to soak up the extra cash. But it's a dangerous game as you mention, easy to start slowing just as the extra cash runs out and everything heads for the bottom again.

 

[Guard Dad]

Depends what the inflation is caused by. Traditional inflation is usually caused by extreme economic growth. Raising interest rates in that situation tends to have a slowing effect on the economy, which can bring inflation in check. Doesn't always work that way, but that's the theory.

The Bidenflation is being fueled by supply chain issues and labor shortages, as well as runaway government spending. Almost all this is due to the policies of the pandemic; lockdowns and restriction, paying people not to work, the government throwing money at people left and right. The economy is already showing signs of weakness, so the raising of interest rates in this situation could have a very negative effect.

 

[Chindog]