By Sloan T. Wilson, The Chicago Times
January 24, 2022
WASHINGTON — The Federal Reserve will likely begin raising interest rates in March for the first time in three years as inflation rages throughout the nation.
Many of the central bank officials support the rate hike, which some economists believe is too late to fight high inflation. However, others believe the rate hike is too aggressive and could lead to a major recession along with uncontrollable inflation.
Investors are rattled by the Fed’s signaling to raise rates as stock markets continues to decline. Market data has shown that the Nasdaq has lost 10% from its high, will the DOW and S&P 500 continue to tumble.
Economic data on inflation has not been kind to the Biden administration as consumer prices have skyrocketed 7%, the highest in four decades. The Fed meeting is expected to end Wednesday, where Chairman Jerome Powell will preside over the decision he has already admitted may be to late to prevent higher inflation.
Many economists believe there will be four rate hikes this year, while investors, according to the CME Group, believe there will be five rate hikes. In a Senate Banking Committee hearing, Chairman Powell was quoted saying “It is really time for us to move away from those emergency pandemic settings to a more normal level. It’s a long road to normal from where we are.”
Powell and the Fed will be forced to raise rates as it begins to phase out $120 billion of monthly bond purchases, which will end in March. The purchasing of bonds was implemented to help keep interest rates low. However, as inflation rages the Fed will have to decide to either raise rates gradually or at a rate to curb the possibility of hyperinflation.
The Chicago Times 