Federal Reserve Spikes Interest Rates, Hard Recession Coming

The Federal Reserve approved a fourth consecutive 0.75-point interest rate spike–the highest level since 2008–on Wednesday in an effort to combat the inflation currently tormenting the US economy.

This isn’t baffling by any means. Markets predicted this would happen weeks before the Federal Open Market Committee (FOMC) meeting on November 1-2.

This decision brings the central bank’s lending rate to a new target of 3.75% to 4%. Additionally, this policy is the most aggressive the Federal Reserve has implemented since the Reagan administration. 

Recession? Likely

This move will continue to affect the millions of American households and businesses that were already hurt by the first five spikes that occurred earlier this year. The White House has plans to obtain $13.5 billion to simply help Americans pay for heat this winter. 

The National Association for Business Economics (NABE) October 2022 survey reports that over half of survey takers believe a recession will occur in the next 12 months. Some think it’s already here.

“The results of the October 2022 NABE Business Conditions Survey show indications of a continued slowing economy,” said Julia Coronado, NABE President. “More than five out of 10 panelists indicate the U.S. economy has a more than even likelihood of entering a recession in the next 12 months–11% believe the U.S. economy is already in a recession.”

This finding just reiterates what financial analysts have been predicting since September. Bloomberg Economics recently reported that the chance of a recession within the next year is 100%. And Wednesday, Federal Reserve Chairman Jerome Powell didn’t sound optimistic about achieving a soft landing–raising interest rates just enough without entering into a recession.

“The inflation picture has become more and more challenging over the course of the year,” said Powell. “That means we have to have policy be more restrictive and that narrows the path to a soft landing.” 

What to Look Forward To

Despite all the negatives happening in the economic niche, somehow stocks and crypto have remained steady.

Bitcoin prices increased 1% in the last hour of Chairman Powell’s speech. Stocks, gold and silver followed suit. One hour after the Chairman’s announcement, BTC was still up 0.6%.

Chairman Powell insisted inflation is an issue that will continue to be dealt with by monetary tightening and raising interest rates. Achieving a 2% interest rate remains the dominant goal of the Federal Reserve.

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