The Federal Reserve is inching closer to destroying any remaining value the U.S. dollar had left.
Skyrocketing inflation has forced the Federal Reserve to take unprecedented action. They announced on Wednesday a move that will eventually suck all the value from the dollar as Americans grapple with economic uncertainty.
To be fair, the Fed only had two options on how to tackle Bidenflation.
a) Raise interest rates to combat growing levels of inflation, which will eventually destroy the U.S. dollar.
b) Keep the interest rates low (or at zero) to retain the dollar’s value.
The Fed chose option ‘a’ as option ‘b’ would swiftly bankrupt the entire nation; however, a meager increase in interest rates will do little to nothing to correct Biden’s skyrocketing inflation, but the U.S. dollar still suffers.
While raising rates depresses demand and should cause the rate of inflation to decrease, it also slows spending. Many economists fear that the Fed’s more aggressive course of action will knock the economy into a recession.
The Federal Reserve announced its most aggressive interest rate hike in nearly three decades in an attempt to counter the excruciating inflation afflicting the economy.
Following a two-day meeting, the Federal Open Market Committee announced Wednesday that it would increase its interest rate target by three-quarters of a percentage point, to a range of 1.5% to 1.75%. The central bank typically raises rates by just a quarter of a percentage point, so the move signals that the Fed is now scrambling to drive down prices.
The drastic move comes just days after May’s consumer price index report came in hotter than expected and showed prices increased by 8.6% on an annual basis, the fastest clip since 1981 during the Great Inflation that helped sweep President Ronald Reagan into office.
All parts of the economy are facing price pressures, but energy prices and food prices, in particular, have exploded over the past several months, hurting consumers by making staples such as gas and groceries increasingly less affordable.
Inflation just hit a NEW 40-year high.
Overall CPI: +8.6% since last year
Fuel Oil: +106.7%
Meat, Poultry, & Fish: +13.1%
Used Cars: +16.1%
Airline Fares: +37.8%
Real Average Hourly Earnings: -3%
— Jacki Kotkiewicz (@jackikotkiewicz) June 10, 2022
Prior to Friday’s report, it was nearly unanimously believed that the central bank would conduct a half-percentage-point hike, as it did at its May meeting, but the report clearly caused Federal Open Market Committee members to reconsider how aggressive they need to be to tame the inflationary plague.
The aggressive tack taken by the Fed is the first increase of its size since 1994.
The high rate of inflation has severely damaged Joe Biden and the Democrats politically. American consumers can track the exact moment our economy began to tank, which just so happens to coincide with Biden’s presidency
Central bank officials also indicated in projections released Wednesday that they expect to increase the degree of rate hikes in the coming months in response to the hotter-than-anticipated inflation. The Fed’s benchmark rate will end this year at 3.4%, the projections suggest, a much faster pace of tightening than previously expected.
The officials also raised their projections for inflation. The median Fed official now sees inflation at 5.2% by the end of the year, compared to a March projection of 4.3%. Inflation projections remained about the same for both 2023 and 2024.
The Fed also upped its forecast for the unemployment rate in the coming months and years. It now predicts the unemployment rate will tick up to 3.7% by the end of the year and 4.1% by 2024, a sign that the central bank may be acknowledging the effect its aggressive tightening will have on the economy.
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Author: Elizabeth Tierney