1/31/2024 0 Comments Bitcoin expert option"Still, there's risk of some pain resulting from this slowdown." What this means for your money "Inflation was never going to revert back to a normal level without some economic slowing," said Graff, a message that Powell has made clear for months. If unemployment goes up, a recession could come sooner - but what happens next with inflation will play a key role in the likelihood and magnitude of a recession. "I see the likelihood of a recession at 70% right now," said Derek Delaney, certified financial planner and founder of PharmD Financial Planning, in March. And at this point, a recession seems unavoidable. The Fed acknowledges the adverse effects and potential risks of this restrictive monetary policy. Many experts predict the Fed's aggressive rate hikes will send us into a recession: a shrinking rather than a growing economy. Experts predict 2023 will be another rough year as the cost of living remains high and interest rates push up the cost of borrowing. What another rate hike means for the economy The previous Fed rate hikes seem to have helped lower inflation, but prices remain high, indicating there's still some work to be done. One of the Fed's responsibilities is to keep inflation low, ideally around 2%. Despite signs that inflation is cooling, many Americans continue to live paycheck to paycheck, and wages aren't keeping up with inflation rates. But despite slowing inflation, prices are still up across the board, making it harder for your dollar to stretch as far.ĭuring periods of high inflation, your dollar has less purchasing power, so everything you buy is more expensive, even though you may not be getting paid more. From February to March, most categories saw an overall cost decrease, with some exceptions such as housing and food away from home. That's a stark difference from last year, when inflation hit record-breaking levels in June with a 9.1% yearly increase. Inflation now sits at 5% year over year, according to the Bureau of Labor Statistics. Here's what you need to know about inflation, what's next for the economy and how to safeguard your money. However, this has also led to increased interest rates for savings, certificates of deposit and money market accounts.Īlthough this rate increase will make borrowing even more expensive, the most important takeaway from the May Fed meeting is the Fed signaling a pause in hikes going forward, said Tom Graff, head of investments at Facet. As the Fed raised rates, the cost of borrowing for loans, credit cards and mortgages also increased, making financing less affordable. In response, the Fed has aggressively raised interest rates to try to bring down prices. From groceries to gas, everyday essentials have gone up in cost. Since early 2022, the Federal Reserve has been working to temper rising prices and tame runaway inflation. "My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2% goal," said Fed Chair Jerome Powell at the Federal Open Market Committee meeting press conference. However, with another bank failure in the news - the recent collapse of First Republic Bank - and inflation still not at the 2% target, the Fed's decision to raise rates incrementally is unsurprising. With inflation slowing and jobless claims still below historical averages, some experts expected the Fed to pause its rate hikes this month. "It has been more than a decade since we have seen rates this high." "The rate increase is a signal that the fight against inflation is far from over, despite signs that things are heading in the right direction," said Bruce McClary, senior vice president for communications at the National Foundation for Credit Counseling. It's clear that while inflation is improving, the Fed's job isn't done. The Federal Reserve issued its 10th consecutive rate hike since March 2022, pushing the federal funds rate to a target range between 5% and 5.25%, the highest level since 2007.
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