As expected, Jay Powell doesn’t pause and stays on his path to hiking rates. The FOMC voted to increase the fed funds target rate by 0.25% to a target range of 4.5%-4.75%, the highest since October 2007. This is the first rate hike this year and the eighth since March 2022. This increase is an indication the Fed is still serious about cooling the economy and withdrawing its easy-money stimulus approach.
But when will he stop? We have seen inflation coming down already and all interest rate measures are usually lagging by about 6 months. It looks like the Fed does not learn from its errors. While they have been behind the curve for a long time it looks like the jump the queue now and are desperate to be ahead of it. If the Fed continues its hard line fight against inflation like this, it might lead the economy into an unwanted recession.
Sven Franssen