Friday, June 10 2022

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At least one Federal Reserve official wants the central bank to deal with its planned 2022 interest rate hikes by preloading them in the first half of the year, but some fear such a move could have a negative impact on stock markets and the economy.

See: How do big companies post record profits when inflation is so high?
Find: where to invest your money when inflation is high – and which investments to avoid

St. Louis Federal Reserve Chairman James Bullard has proposed that the Fed raise its benchmark short-term borrowing rate by a full percentage point by July to keep inflation under control, reported CNBC.

Bullard first made the suggestion in an interview with Bloomberg last week. His comments rattled stock markets and led some to speculate there could be as many as seven quarter-percentage-point hikes by the end of the year – far more than the four hikes that s expect most economists.

Bullard reiterated his position this week, telling CNBC that the Fed needed to further accelerate its planned hikes.

“We were surprised by the rise in inflation,” he said. “Our credibility is at stake here and we have to react to the data. However, I think we can do it in an organized and non-disruptive way for the markets.

This last point is critical, as many fear that aggressive rate hikes will effectively disrupt markets. For investors, this could lead to increased volatility in a stock market that has already been choppy this year.

Find out: Despite the January inflation report, the Fed is not inclined to raise interest rates immediately

Anticipated interest rate hikes could also lead to significantly higher borrowing rates for everything from mortgages and cars to business loans. That in turn could stall America’s economic recovery — an economy seeking relief from the worst of the COVID-19 pandemic.

“History tells us with Fed policy that abrupt and aggressive action can actually have a destabilizing effect on the growth and price stability that we are trying to achieve,” the Fed Chair said. San Francisco, Mary Daly, at CBS’ “Face the Nation” on February 13. .

But Bullard played down concerns about the economy, saying corporate earnings “will be fine” and predicting that the waning impact of the omicron variant will lead to a “second kind of reopening of the U.S. economy”, it reported. MarketWatch.

Learn: Latest Fed meeting shows possible interest rate movement this year
Explore: 2022 Fed Rate Hike: Experts Predict Number of Expectations and Rising Interest

The most pressing issue now, he said, is getting the runaway inflation under control, especially as it has risen by around 7.5% in recent months.

“The inflation we’re seeing is very bad for low- and moderate-income households,” Bullard said. “People are upset, consumer confidence is down. It’s not a good situation. We have to reassure people that we will defend our inflation target and we will return to 2%”.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who has previously held positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work has also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal, and Business North Carolina magazine. He holds a BA in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting has earned him awards from the North Carolina Press Association, Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A North Carolina native who also writes fiction, Vance’s short story “Saint Christopher” placed second in the 2019 Writer’s Digest short story competition. Two of her short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. Her first novel, Voodoo Hideaway, is published in 2021 by Atmosphere Press.

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