Federal Reserve holds interest rates steady (as it goes?)
Interest Rate increases to fight perceived inflation or not fight perceived inflation? Big believer in the cause of much of the inflation being deliberate supply chain planning to increase prices. Have not seen a deliberate price increase yet which will fix a supply chain. Poor or deliberate planning creating issues, a lack of knowledge on supply chains, and invalid sourcing. Pick one.
Similar occurred in 2008-10 and it raised its ugly profit-taking-head again in 2021. We still see ruminant of it in 2024. Are the FED’s actions the right ones to battle commercial Supply Chain issues? From the news sources . . .
The Federal Reserve announced Wednesday it will leave interest rates unchanged, delaying the possibility of rate cuts as well as any relief from sky-high borrowing costs.
Overall, expectations the Fed is pulling off a soft landing have increased, but that offers little consolation for Americans with high-interest debt.
Greg McBride, chief financial analyst at Bankrate.com . . .
“And now there may be fewer interest rate cuts on the horizon after hotter-than-expected inflation reports sent the message that “we are moving in the right direction, but we’re not there yet. For consumers, it means “a very slow downward drift in savings rates and no material change in borrowing costs for credit cards, auto loans or home equity lines of credit.”
The Fed holds interest rates steady. What that means for your money, cnbc.com
It doesn’t seem logical to raise interest rates to fight inflation caused by supply chain issues. Businesses use credit to expand production to increase supply. Why would you want to squelch that with higher interest rates?
My concern is the income and wealth gap in the US. To maintain demand is requiring ever higher government spending and stimulus because the bottom half does not have the income to consume all the output to maintain gdp growth. Now that Republicans control the purse strings in the House and are hell bent on controlling spending, the economy could be in trouble. So the Fed steps in and raises interest rates. The Fed and Treasury are now paying several hundred billion annually more in interest payments than they were when rates were 0%. This is a “back door” channel of government stimulus. The Republicans have no control over the Fed payments, and even Republicans are not stupid enough to default on government bonds.