The US Federal Reserve announced a historic hike in the interest rate, raising it by 75 basis points. This means the interest rate will increase from almost 1.5% to 1.75%.
Biden’s Panic Mode is Now On
Usually, the Fed increases the interest rate by 25 bps. So, this 75 bps hike is the largest since 1994, which is promising to negatively affect the employment rate.
This seems like a desperate attempt of the Biden administration to curb alarming inflation ahead of the midterm elections to get some political gain.
According to Fed officials, the government is aiming to bring inflation down to 2%.
Initially, it was thought the Fed would increase the policy rate by 0.5 percentage points, but the latest CPI report prompted the administration to revise its approach.
BREAKING: The Federal Reserve has raised interest rates by 0.75%, the highest increase since 1994.
— Watcher.Guru (@WatcherGuru) June 15, 2022
The CPI report indicated inflation rose by 8.6% in May on an annual basis, which was the highest since 1981.
Jerome Powell, the Fed Chairman, asserted it is critical for the central bank to make this unpopular decision to bring inflation rates back to normalcy.
The projections of the Federal Reserve are the inflation rate will stand at 5.2% by the end of this year.
Biden Just Triggered a Possible Recession
As the interest rate hike is directly related to unemployment, this critical factor is also worrying the administration. Thus, the Fed stated the projected unemployment rate for 2022 is 4.3%, while it will be 4.1 % by 2024.
Rising unemployment is pushing many economists to think the country is heading towards a possible recession.
However, Democrats are unlikely to get away with the negative political impacts of the current dangerous decisions, as the recession expects to hit after the midterm elections.
However, Biden is also unlikely to get the political advantage of the possible reduction in inflation.
Reportedly, the prices will take some time to come down to the Fed’s estimated target, so Democrats will still have to face the brunt of voters for the 2022 elections.
"Why is the market collapsing?”
Because the Federal Reserve kept interest rates at 0 and then pumped nearly $5 trillion into the market.
They created the largest bubble in history and now that it's popping, they want you to blame anyone but themselves.
— Nick Freitas (@NickForVA) June 13, 2022
The latest survey established that nearly 68% of economists believe the recession will come next year.
If this does happen, it means Democrats will have enough time to get away with its politically negative consequences before the 2024 election.
Jamie Dimon, the CEO of JPMorgan Chase, asserted the world should be prepared for the economic “hurricane.”
He indicated the Fed’s plan to increase the interest rates, coupled with the uncertainty in the Russian attacks on Ukraine, is pushing the global economy to the brink of collapse.
While Powell acknowledged this is an abnormal increase in interest rate, he also signaled that a similar hike in the near future may be coming.
Powell claimed that a 75 basis point increase is an “unusually large one,” but added the administration is aiming for a 50 bps or 75 bps hike in its July meeting, as well.