Fed chair Jerome Powell has announced that the Fed is getting very serious about reducing inflation and the rising US debt.
Powell emphasized that there would be weaker economic growth and higher employment in their bid to reduce inflation. "These are the unfortunate costs of reducing inflation." "but a failure to restore price stability would mean far greater plan," he said.
Powell's statement came just after Fed governor Christopher Waller had spoken about the state of inflation in the US this month. According to Waller, "if we don't get inflation down, we're in trouble."
The Federal Reserve is expected to make another large increase in interest rates this week when they hold their regular policy meeting.
The decision made by the Fed on the interest rate and inflation will be announced today, September 21st, 2022. This latest move by the Fed is to test the resilience of the world's economies as the value of the dollar soars.
Fed governor, Christopher Waller, made it known that it is their number one job to keep inflation. He further said that failure to keep inflation would lead to a high-level recession.
While the Fed raises interest rates, the US debt continues to grow. Financial experts have pointed out that the growing US Debt could be the line item to pay interest costs.
Maya MacGuineas, president of the committee for a responsible federal budget, lent his voice concerning the increasing interest costs. He says, "Whether you're a big government person who wants to spend a lot more or a small government person who wants spending to come down, neither of those gets first claim of the dollar. The first claim is always interest payments".
Fed Tough Message On Inflation
Information reaching Newsvot shows that the annual inflation rate for August was around 8.3%. Greg Mcbride, a chief financial analyst for Bankrate.com, said, "inflation is still running hot and is not easing as fast as expected."
Mcbride further stated, "the Fed has been delivering a 'tough love message that interest rates will be higher, and for longer, than expected."
The Federal Reserve System has also been raising its benchmark rate more than three times in 2022 — from approximately zero to about 2.375%.
Speaking on this, Mcbride said that the Fed would continue to increase the rates to reduce inflation. According to him, "the Fed will continue to hike interest rates until it actually restrains the economy and intends to keep rates at those restrictive levels until inflation is unmistakably on its way to 2%".
The Fed's actions mean that its citizens will find it harder to buy a car, use a credit card, or get a mortgage.
Controlling the inflation and rising US Debts
In recent weeks, Fed officials have made it known to the public that the government will do all it takes to bring inflation and debt under control.
Christopher Waller stated that there might be higher unemployment in the bid for the Fed to get tough on inflation. However, he stressed that it hasn't gotten to the point of higher unemployment. "We're are not facing any tradeoffs, really," he said.