Housings, food, energy – the price of all these necessities have been driven up, causing the current U.S. economy to suffer in inflation.
Under the influence of the Russian invasion and war in Ukraine, the U.S. has dramatically lowered its purchase of fuels from Russia in support of Volodymyr Zelenskyy and Ukrainians. Furthermore, the new virus breakout in China has also limited the supply chain, driving product prices up similar to fuels in Russia. With the addition of these two huge factors, the burden of the U.S. grew significantly and is currently in a position more dangerous in four decades. Economic inflation has resulted in a substantial adverse effect on consumers and investors.
A change in the policy interest will transform that.
4.3% – the Federal Reserve predicts the inflation rate to remain high throughout 2022, and their goal is to pace this projected rate to 2.3% by 2024. Despite this, while fidgeting with the high risk of inflation and avoiding a potential national recession, the Federal Reserve has decided to raise the policy interest rate by a quarter of a percentage point starting on Mar.16. This first change since 2018 will have an initial negative appeal to the people but will later positively reflect the economy on a broader view as the Feds have worded. Striving for change, the Federal Reserve’s action in raising the policy interest is believed to be one of the first steps in dragging America out of its threatening position.
Pete Buttigieg, the U.S. Transportation Secretary, said, “I don’t think anything is permanent, but I think it’s clear that this is a serious economic issue … The president has been focused on prices and the effect on Americans for some time,” as he discusses his opinion on the current U.S. economic system and Biden Administration’s American Job’s Plan proposal.
Aiming for success, the Federal Reserve hopes to recover the U.S. from its daunting stage. Borrowing the bank’s money and raising interest rates for vehicles and credit cards as a short-term resolution, the policymakers are making a sharp turn away from economic intensification. This new change will promote a moderate transition of user purchases, thus slowing the economy down as a whole. Eventually, this slowing of the economy will bring down the risk of inflation and re-establish a more sustainable economy. Given the pressure and responsibility of the nation’s success, the Feds are pushed to ensure their choice is the most appropriate option for the country. While their decision may be viewed as a high-risk gesture initially as they sacrifice the short-term wealth, a promised prediction will ultimately be traded for the better. Moreover, the Federal Reserve also announced its attempt to launch six other policy interest rate projects in 2022.
James Paulsen, Chief Investment Strategist of the Leuthold Group in Minneapolis, discussed his agreement with the recession risk being at one of the highest levels compared to a year ago. “But I think there’s a fairly good chance that we’ll have a soft landing,” Paulsen said.
Attempting to revive the U.S. economy, the Feds are ambitious to cope with U.S. inflation. While raising the policy interest rate will temporarily slow down the market, it will help build a more robust economy and development in the long run.