The majority of Fed members forecast three interest rate hikes in 2022 to fight infla

[NewsFeeder]

The majority of Fed members forecast three interest rate hikes in 2022 to fight inflation

Every quarter, members of the committee forecast where interest rates will go in the short, medium and long term.

More @ CNBC...

 

[Scout333]

Does anyone have any idea how three interest rates increases could have any positive impact on the large increases in inflation we are seeing? Appears they would more likely damage the economy especially the average family fighting daily living cost increases? Doesn't make any sense to me?

 

[DreamboatAnnie]

Does anyone have any idea how three interest rates increases could have any positive impact on the large increases in inflation we are seeing? Appears they would more likely damage the economy especially the average family fighting daily living cost increases? Doesn't make any sense to me?

I believe interest rate hikes are supposed to increase the cost of borrowing (I.e. For Cars, mortgage costs on homes, credit card buys, etc) which would cause less spending overall which would translate into less demand causing supplies to increase and thus slow or decrease inflation. Inflation is reportedly caused by too few goods compared to demand. So, it is an attempt to slow economic growth. Yes, it would damage or slow the growth of economy depending on how quickly it's done. It's a tricky balancing act and basically an attempt to create what they refer to as "a soft landing", which I understand is hard to do. All the economics folks talking (and Kudlow) indicate they should have started rate increases a year ago, and they say it's now too little, too late. So inflation may increase significantly if it can't be controlled. Also, additional multi trillion-dollar spending by Congress will not help. But neither will the Fed Treasury buys, so the slow down/tappering on those buys should be good, but not sure market will ever like that.

What I've been wondering is how the Fed can create so much additional debt without legislative approval. I guess I need to read up more on that. This is truly scary. I never did finish reading the book recommended by Coolhand, "The Creature of Jekyll Island" that talks about this and the Fed.

In TSP, we really don't have a good hedge for inflation, except that it still seems stocks would be best provided you can navigate a downturn.

Best wishes!

 

[Scout333]

Thanks for the response DBA! Still seems that the average family who got hit hard by the pandemic and had to increase debt ie consumer debt such as credit card debt, etc. just to get by day to day will be hit even harder by the interest increases on top of the inflation hitting necessities such as food, gas, utilities,
etc. I took all of the economics courses in college but didn't make sense then and even less now. I am suspecting a real rocking to this economy in the next year. Hoping I am wrong!