The Federal Reserve today announced an interest rate increase of a quarter percentage point, as expected. CEI Senior Economist Ryan Young says the series of interest rate increases has helped wrangle inflation and is paying off.
Statement by Ryan Young:
“There were no surprises in today’s Fed announcement. The slower rate increase—a quarter percentage point instead of three quarters—is a sign the Fed is winding down the increases. There will likely be one more quarter-point rise after its next meeting in six weeks, and that should be it.
“The Fed has already done the heavy lifting in getting inflation back to normal. It ended its $5 trillion bond-buying program last March, which is also when it began steadily hiking the federal funds rate. These things have a long lag time before they take effect, but month-to-month inflation has already been lower for a few months now.
“The Fed caused the inflation in the first place by over-reacting to COVID with too much stimulus. Congress and Presidents Trump and Biden also deserve some of the blame with their massive deficit spending. But the Fed began fixing its mistakes about a year ago, and now it is paying off. There is no guarantee their actions will avoid a recession, though it helps that the economy is otherwise in decent shape. A soft landing remains possible.”