The producer price index, which measures the prices received by manufacturers, has risen 10.8% in the last year.
In short, inflation is very, very bad right now. Hence, the calls for unusually aggressive interest rate hikes at the Fed.
As for the “experts” who have enormous influence over the economy, they don’t quite seem to have a grasp on what’s happening.
Just last month, Fed Chair Jerome Powell dismissed the possibility of a 75-basis point hike saying, “A 75-basis point increase is not something that the committee is actively considering.”
On The Five’s New Year’s Day Special, my prediction for 2022 was: The Federal Reserve in trying to fight runaway inflation (raising rates and destroying money) would cause asset bubbles to burst, asset prices to collapse. Whammo.
The broader picture is no better. Economists at Morgan Stanley have expressed concern over the possibility of impending stagflation, the end result of high inflation and a stagnant or shrinking economy. This could also affect an already roller coaster stock market.
Biden blames Putin for inflation. So now we have to find out how in the hell Putin broke into the Federal Reserve and printed trillions of US dollars!
A significant hike in interest rates from the Fed affects, well, anything that has an interest rate. Things like savings and bonds accrue higher interest payments. But as interest rates climb, expect to pay more on things like credit card bills and mortgage payments.
Higher interest rates also affect things like refinancing an existing mortgage or paying off student loans. Big ticket items will also cost more, as mortgage rates and auto loan rates rise. As most know, even a small change in interest rates on a large purchase can mean big bucks down the line.
Rising rates make borrowing more expensive in general, even affecting the liquidity of things like stocks and even crypto currency.
But despite all of the dire economic news and predictions, last week, in a remarkable display of being out of touch with average Americans, White House Press Secretary Karine Jean-Pierre insisted that, “the president’s economic plan, as we see it, is working.”
The Federal Reserve’s bid to contain the hottest inflation in decades will end in a recession, per Bloomberg.
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