Fed Should Do More to Fight Inflation with Interest Rate Increases

The Federal Reserve Chairman today confirmed that further interest rate increases are likely, maybe as soon as December. CEI economy expert Ryan Young says the Fed is on the right path but should be more aggressive with rate increases in order to bring inflation down.

“The federal funds rate is still below the inflation rate and will remain that way after the next increase. In real terms, it is still negative. That’s not good. It means banks actually get paid for taking out overnight loans. It should be the other way around, as with most other loans.

“It is good that the Fed is still going to raise the rate at its upcoming meeting. But it should be more aggressive, and it needs to continue raising rates until the real interest rate is at least above zero. The way things are going, that probably means at least two more rate increases. So unless there is a drastic slowdown in the inflation rate in the next month, next week’s rate increase should not be the last.”

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