We all should brace for more ‘pain’ from Fed
Lest anyone wonder whether unelected government officials can wield enormous power over our lives, Federal Reserve Chairman Jerome Powell is leaving no doubt while he declares his dedication to what he believes is the Fed’s mission.
“Our responsibility to deliver price stability is unconditional,” Powell said last month.
To accomplish such a goal the Fed on Wednesday made good on what he said undoubtedly would “bring some pain.”
Intensifying its fight against high inflation, the Federal Reserve raised its key interest rate by a substantial three-quarters of a point for a third straight time Wednesday and signaled more large rate hikes to come. It’s an aggressive pace that will heighten the risk of an eventual recession.
The Fed’s move boosted its benchmark short-term rate, which affects many consumer and business loans, to a range of 3 percent to 3.25 percent, the highest level since early 2008.
The officials also forecast that they will further raise their benchmark rate to roughly 4.4 percent by year’s end, a full percentage point higher than they had forecast as recently as June.
This makes many consumer and business loans more expensive than they have been since before the financial crisis of 2008.
Federal Reserve officials want to stop inflation by slowing growth, producing job loss, reducing borrowing … they want a recession. They’ve tried to dress up their aim as working toward a “soft landing,” but most experts agree that is not going to happen.
Inflation is at a nauseating 8.3 percent; and anyone who has tried to buy the essentials lately knows food and fuel prices are skyrocketing past the point of being within reach for many of us. But higher wages are contributing to inflation, too; as is increased spending.
Many in our region will wonder just who is getting these higher wages, and how anyone has money to be spending more. Therein lies the problem. Here in our Valley, we already tend to be behind the pace. When everyone is talking about economic recovery, we are the first to get hit hard when officials engineer a downturn. And, in this case, the Fed believes it can stop inflation by doing more than just pumping the brakes.
“It’s going to end up being a hard landing,” said Kathy Bostjancic, an economist at Oxford Economics.
If that’s the case, it sounds as though Ohioans had better buckle up.