Fed Raised the Rate, Now What?

Howard Schneider and Ann Saphir of Reuters News report on the Fed's raised interest rate. The benchmark rate is now 5.00 - 5.25% and removed language anticipating future hikes.They report that Fed Chairman Powell said that inflation is still the top concern of economic policy makers. Many are concerned by the failure of three banks in the past few months, largely due to devalued older holdings that were loaned at a lower rate.Reuters predict the rate will go down in September, but Powell would not commit to that timespan, believing the crunch will last longer.The last time interest rates were this high was in 2006-2008, right before the big financial crash of 2008.

Will the Fed Raise Interest Rates Yet Again?

The New York Times has admitted the US economy is in a recession and reporter Jeanna Smialek asks if the Fed will take steps to prevent what she calls a "slight recession" from turning into a big one.Inflation is high - as consumers well know - and the Fed has usually dealt with that by raising interest rates on loans, thus making it more expensive for already-stretched consumers to take out loans for houses, cars, or businesses. This results in less wage growth and increased unemployment and less consumer spending. Seems counterintuitive, right?The idea is that a slower economy will bring inflation under control (as shoppers stop shopping, sellers lower prices, so the idea goes). But the price increases we've been dealing with since 2021 are now driven by services - i.e. wages - and not by material goods. That's a lot harder to curb, as wage cuts are impossible to institute.Banks are failing, largely because they didn't have the capacity to deal with higher interest rates making their older holdings worth less. So will other banks fail if the Fed raises rates? And if so, what kind of chain reaction might that set off?See what the Fed decides this afternoon.