The US Federal Reserve has announced a historic hike in the interest rate, raising it by 75 basis points. This means that the interest rate will increase to almost 1.5% to 1.75%.
Biden’s Panic Mode is Now On
Usually, the Fed increases the interest rate by 25 bps. So, this 75 bps hike is the largest since 1994, which is promising to affect the employment rate negatively.
This seems a desperate attempt of the Biden administration to curb the alarming inflation ahead of the midterm elections to get a bit of political gain.
According to Fed officials, the government is aiming to bring inflation down to 2%.
Initially, it was thought that the Fed would increase the policy rate by 0.5 percentage points, but the latest CPI report prompted the administration to revise its approach.
BREAKING: The Federal Reserve has raised interest rates by 0.75%, the highest increase since 1994.— Watcher.Guru (@WatcherGuru) June 15, 2022
The CPI report indicated that inflation rose by 8.6 % in May on an annual basis, which was the highest since 1981.
Jerome Powell, the Fed Chairman, asserted that it is critical for the central bank to take this unpopular decision to bring the inflation rates back to normalcy.
The projections of the Federal Reserve is that the inflation rate will stand at 5.2 % by the end of this year.
Biden Just Triggered a Possible Recession
As interest rate hike is directly related to unemployment, this critical factor is also worrying the administration. Thus, the Fed stated that the projected unemployment rate for 2022 is 4.3%, while it will be 4.1 % by 2024.
Since rising unemployment is pushing many economists to think that the country is heading towards a possible recession.
But Democrats are unlikely to get away with the negative political impacts of the current dangerous decisions, as the recession expects to hit after the midterm elections.
However, Biden is also unlikely to get the political advantage of the possible reduction in inflation.
Reportedly, the prices will take some time to come down to Fed’s estimated target, so Democrats will still have to face the brunt of voters for the 2022 elections.
"Why is the market collapsing?”— Nick Freitas (@NickForVA) June 13, 2022
Because the Federal Reserve kept interest rates at 0 and then pumped nearly $5 trillion into the market.
They created the largest bubble in history and now that it's popping, they want you to blame anyone but themselves.
The latest survey established that nearly 68 % of economists believe that the recession will come next year, which means that Democrats will have enough time to get away with its politically negative consequences before the 2024 elections.
Jamie Dimon, the CEO of JPMorgan Chase, asserted that the world should be prepared for the economic “hurricane.”
He indicated that the Fed’s plan to increase the interest rates, coupled with the uncertainty in the Russian attacks on Ukraine, is pushing the global economy to the brink of collapse.
While Powell acknowledged that this is an abnormal increase in interest rate, he also signaled toward a similar hike in the near future.
Powell claimed that a 75 basis point increase is an “unusually large one” but added that the administration is aiming for a 50 bps or 75 bps hike in its July meeting as well.