Please verify

Blaze Media
Watch LIVE

The Fed prepares to fight inflation with more rate hikes this week despite growing concern regarding the economy

Bloomberg / Contributor

With inflation at a 40-year high in June, the Federal Reserve is feeling the pressure to raise interest rates for the fourth consecutive month in hopes of slowing runaway inflation. However, Americans worry that rapidly increasing rate hikes might send the U.S. into a tailspin recession.

In Fed Chairman Jerome Powell's testimony to the Senate last month, he stated, "It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all."

The Fed hopes its actions will force employers to slash spending because of the added burden of increased interest on business and consumer loans.

To regain control of inflation and get on track to a more "neutral" state, the Fed raised rates in June by .75 percent. This substantial hike was more than was forecasted in previous talks.

Chairman Powell signaled to Americans that another substantial rate hike would be announced this Wednesday and stated, "Having seen inflation come above target over and over again, we said we'd move more aggressively if it was appropriate. We thought it was appropriate."

The Senate pushed back, expressing concerns about a potential recession on the horizon. Chairman Powell replied that while a recession may be possible, it would not be caused by the Fed, insisting the economy is strong enough to handle steady increases.

To combat the consumer price index growth of 9.1% seen in June, Chairman Powell is predicted to announce a significant three-quarter-point interest rate hike this month. He will also potentially announce another in September, as well as provide information regarding when the increases will be paused.

While the Fed continues to set expectations of growing interest rates throughout the year, the question remains to what extent they will be raised and when the rate hikes will stop.

The U.S. Federal Reserve isn't the only central bank making these moves. Central banks worldwide are enacting similar rate hikes to tackle inflation, including the European Central Bank and the Bank of Canada.

Most recent
All Articles