(JustPatriots.com)- Members of the Federal Reserve are about to embark on yet another interest rate hike as part of their efforts to try to curb inflation, while also balancing the need to avoid a full-blown recession.
Starting Wednesday, the Fed will hold a policy meeting that will last two days, and they are expected to announce another rate hike. This time, it could be as much as three-quarters of a percentage point.
Officials with the Fed have said many times in the recent past that their main priority is to fend off inflation. American families are struggling to pay for basic necessities such as food, housing and gas, and the Fed is trying to do something about that.
The central bank is so consumed with fighting inflation that it may do so at the expense of the overall economy. Some pundits are concerned that more and more rate hikes at the pace the Fed has been instituting them could lead to a recession. But, that doesn’t seem to deter the Fed’s overall plan.
The job market is considered quite healthy, with unemployment levels near record lows. And while wage increases have been significant, too, that extra money is being completely overshadowed by the fact that consumer prices have hit new 40-year highs — reaching as much as 9.1% back in June.
If the economy does slow as a result of a recession, there are likely to be some job losses as a result. Yet, members of the central bank are more concerned with inflation, as that could have a much larger negative impact on people as a whole.
Balancing the two — staving off inflation while also preventing against a recession — is going to take a lot of luck, many economists believe. Still, there is confidence that doing so is possible.
Janet Yellen, the Secretary of the Treasury who once served as the chief of the Fed, said recently:
“I’m not saying that we will definitely avoid a recession, but I think there is a path that keeps the labor market strong and brings inflation down.”
Part of the problem is that many of the issues that are causing inflation are long-term. Donald Kohn, the former vice chair of the Fed, said recently that it’s a “very complicated, multidimensional issue,” thanks in large part to the uncertainty surrounding the global supply chain.
The U.S. rebounded quickly from the pits of the pandemic in 2020, as the government injected trillions of dollars of relief into the economy and directly into Americans’ pockets. But, prices started increasing at an out-of-control pace, at least in part because of all this extra money that was out there.
During much of the worst days of the pandemic, the Fed had maintained near-zero interest rate levels. That all got lifted back in March, though, when they increased the rate by 25 basis points. Another 50-point increase happened in May and another 75-point increase happened in June.
Now, the Fed is staring down at yet another 75-point increase in what it hopes will start to bring prices down.