September 21, 2022, 18:45 PM
September 21, 2022, 18:45 PM
Today, the Federal Reserve raised its key interest rate by 0.75% for the third time in a row as it scrambles to get ahead of runaway inflation that is sapping the profits of American consumers.
The Federal Open Market Committee said – in its latest report – that it now projects that the US unemployment rate will rise from 3.7% to 4.4%, which means that hundreds of thousands more Americans will be out of work, according to NBC News.
Inflation continues unstoppable. This month the Bureau of Labor Statistics reported that inflation had risen 8.3% year over year and 0.1% month over month. Both figures were higher than analysts expected, raising fears that inflation is taking hold.
Supply and demand generate a complex scenario. The essence of the problem is that demand in the economy remains too high amid a global supply shortage. Thanks to restricted spending during the Covid lockdowns and federal stimulus plans, consumers found themselves flush with cash as the economy began to reopen.
In the meantime, Covid supply chain issues persisted, and Russia’s invasion of Ukraine curbed access to both food and energy in other parts of the world.
By raising interest rates, the Fed hopes to curb consumption and borrowing, which in turn should put downward pressure on prices. Nevertheless, this will come at the cost of an economic slowdown.
