After pausing in June, the Federal Reserve resumed its effort to boost borrowing costs and squash inflation by raising the benchmark rate of interest by a quarter of a percent.
Reports show that the key federal funds rate is now between 5.25% to 5.5%, the highest level since 2001. This decision will have a chilling effect on the economy as borrowing prices for houses, vehicles, and other goods continue to rise.
It is the eleventh time interest rates have been raised since 2022. Despite a recent slowdown in inflation, policymakers have not closed the door on more interest rate hikes this year.
According to economic forecasts released following the Fed’s June meeting, the majority of Fed members anticipate interest rates to climb to 5.6% by the year’s end of 2023, implying a minimum of another quarter-point hike this year.
The job market has remained tight despite all predictions to the contrary. The need for employees is rising faster than the supply of available employment. This disparity may cause salaries to stay high, forcing businesses to increase prices to meet rising labor expenses.
Although inflation has decreased from a record of 9.1 percent, it is still much over the pre-pandemic norm and the Federal Reserve’s goal rate of 2 percent.
Excluding the more volatile readings of food and energy, core prices are running at a rate more than twice the Fed’s aim, indicating substantial underlying price pressures.
A report shows that Vice President Kamala Harris recently summed up Bidenomics by saying that Americans are only a $400 unanticipated expense away from bankruptcy.
According to media outlets, JPMorgan Chase’s CEO is skeptical of the administration’s economic plan, which President Joe Biden calls “Bidenomics.”
Dimon categorized most of Bidenomics as “industrial policy,” or an approach to promoting or subsidizing certain sectors. Dimon believes that inflation is being caused by the billions of dollars spent by the Biden Administration and that they should advocate for free-market growth policies.