The Historical Maneuver The Federal Reserve Is About To Make
The Federal Reserve is deciding between a rate hike of 3/4 of a point or a full point to help steer the economy toward a "soft landing" and avoid a recession.
This article is more than 2 years old
Do we want the Federal Reserve’s bad news or “meh” news first? Does it matter? Maybe just a little.
The Federal Reserve is about to either raise rates by three-quarters of a point for the third consecutive time, to 3%, or it will hike them by an unprecedented one full percentage point to 3.25%. As Tell Me Best recently reported, this is part of a strategy to give the US some relief from ongoing inflation.
Give Me The Bad News First, Federal Reserve
It’s not great news, but it’s not the worst as we’ve been seeing inflation climb and stocks drop. But the Federal Reserve has to do something in order to get some relief from this year’s inflation. Economists aren’t really sure what to make of what will happen next as we are living in again, unprecedented times.
As of the time of this writing, Wall Street is unsure if the Federal Reserve will keep hiking its rates into November, or if inflation pressures will cool on their own. If this happens, the central bank will be able to slow its pace a little, says CNN.
The Everyday Man Effect
The Federal Reserve is facing a conundrum as the economy is running a little too hot right now. But the good news is that the job market is strong and consumers are spending at a great clip. Unfortunately, housing prices remain high even though mortgage rates have spiked.
This rate increase affects the typical everyday consumer transactions such as credit card and mortgage payments, student loans, personal loans, vehicle loans, and more. The Federal Reserve is trying desperately to adjust as the market keeps moving rapidly in hard-to-predict ways. If the Federal Reserve keeps increasing rates, it is likely that the US will experience a mild recession, much like the one experienced in 2001, not a full-on economic collapse in 2008.
Feds Staying Away From a Housing Market Crash
In 2008 Federal Reserves rates increased so much (literally through the roof) that many people walked away from their mortgages. Homes were not worth how much money folks put into them. Hopefully, what we will experience will not be anything compared to that. It will be known as a “soft landing.”
If consumers continue to enjoy a strong economy when it comes to job growth, however, the Federal Reserve’s strategy is to also affect slow wage growth. This will be a big detriment for those living paycheck to paycheck.
And Now, For the “Meh” News
Tell Me Best recently reported about the “soft landing” outcome earlier this month. This means the government will be able to control inflation without a full-on recession. This takes us back to the “eh” news over the “bad news.” Things could definitely be worse. And here’s hoping that they won’t be.
We recently reported that the Federal Reserve told folks to prepare for the worst. It seems like we got away from the “worst” and have landed in a fluffy field of “meh.”
