NBC News posted an article concerned with the Fed’s response to inflation. With inflation rates rising to painful levels, investors are looking to the Federal Reserve to do something about it. However, some investors now worry that the Federal Reserve may move too quickly on monetary policy and cause a recession. The Fed considered raising rates by 50 to 75 basis points in early September. By late September, however, that number changed to raising rates by 100 points instead. This is causing investors to be concerned. Jeffrey Sherman, chief investment officer for DoubleLine believes that this issue has happened many times before, with the Fed having “overtightened…more often than they have not”. It has also been stated that a rise in rates to 4.5% would come with the consequence of stocks sinking by 20%. Although it is currently unknown how far the Fed will go, the worry alone of Fed tightening has contributed to a decline of 19% in the S&P 500 this year. Some may say that the Fed should be aggressive when fighting inflation, but others believe that rising rates too high will do more harm to the economy than good.
https://www.nbcnews.com/business/economy/investors-fear-higher-interest-rates-inflation-rcna48308
Tommy, I think that it is interesting that you looked at the Fed from an angle of over-tightening. I believe that many economists right now are pondering that question as we follow the feds lead as they push int rates further. However, I think the fed will continue until there is a change, likely a slow in inflation values.Once inflation slows, we will see an ease of aggressive tactics the fed is using to combat our increase in prices.
ReplyDeleteThe fact that inflation is impacting investment rate is scary. Investment is an important part of the economy's overall health. If people are unable to invest, this will cause the economy to experience further issues. You raised a really interesting consequence of investment.
ReplyDeleteIt is interesting that investors are getting concerned because what the Fed is doing is to help the current economy and ensure that the inevitable recession won't hit as hard. The consequences that you pointed out do pose the question of what could happen.
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