April 26, 2022 · less than 3 min read
Time to buckle up – interest rates are about to go big.
Pulling the brakes on consumer prices
Last month was just the start. The Federal Reserve raised interest rates for the first time since 2018, calling an end to its pandemic-era easy money policy. But with inflation continuing to rise, new steps are set to be taken to combat the escalation and stamp on the inflation brakes.
With the Fed’s May meeting looming, traders are pricing in a nearly 100% likelihood of a half-point hike. And as if that wasn’t enough, there’s a 70% chance that June could see a three-quarter of a percentage point rise. Yikes.
Action, not reaction
There’s pressure on the Fed to put out the financial fire before the flames start spreading. “There is only so much they [the Fed] can do now, it’s almost already too late,” said Johan Grahn, vice president and head of ETFs at AllianzIM. But the outlook could be bleak for consumers.
Back in the late seventies and early eighties, the Fed ramped up rates to 20% to fight double-digit inflation. And what was the outcome? A double-dip recession. So, with that in mind, the Fed is walking a real tightrope. Talk of a post-Covid recession has been prevalent for some time, and while high rates may slow the housing market, experts are concerned that it could be a real gut punch for the broader economy. Rather them than us making the next moves, right?
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