The United States Federal Reserve cannot detect the impending recession because it is too preoccupied with pursuing illusory inflation. The Fed is a perfect example of the enormous harm that unaccountable elites may cause and how incorrect they can be.
This week, Fed Chair Jerome Powell declared the central bank will halt its year-old campaign of interest rate rises in a bid to combat inflation.
The rate of inflation has drastically decreased and is close to zero now. Alan Reynolds, Senior Fellow at the Cato Institute, points out that the producer price index for final demand products declined by 2.2 percent over the previous year, while prices for services only increased by 2.7 percent. The Fed reportedly wants annual inflation to be at 2%.
Powell and the majority of the Federal Open Market Committee members continue to believe inflation is ready to roar back and eat our buying power, despite what the data indicates. The economy’s impending implosion caused by the Fed’s interest rate increases, which at this time seem certain, should worry us all much more.
According to reports, the Fed plans to start increasing the fed funds rate (and consequently all other interest rates) again next month. The target rate is currently between 5 and 5.25 percent, which is the highest level since 2007, which was immediately followed by a severe recession and a catastrophic liquidity crisis. The target rate would reach its highest level in 22 years as a result of the anticipated hike in July.
Unfortunately, the Fed feels that even that is insufficient. According to The Wall Street Journal, 12 out of the 18 Fed officials said they anticipate raising rates at least twice more this year.
And to make matters worse, Powell assured the media that the Fed will maintain its high-interest rates for an additional two years.
Powell stated that “inflation hasn’t really come down. We are going to have to keep at it because it hasn’t responded very much to our—to our current rate hikes.”
However, as seen by the producer price index figures, inflation has “reacted a great deal” to the rate increases, and these actions are already harming the economy. This effect will only worsen regardless of what the Fed decides to do in the months that lie ahead.
Author: Scott Dowdy