The Federal Reserve, which is like the money manager for the country, decided to keep interest rates the same on Wednesday.
These rates were already quite high, the highest they’ve been in 22 years. They also said they might raise rates one more time in 2023 to control how prices are going up.
Right now, the interest rate is between 5.25% and 5.5%, and they want it to be between 5.5% and 5.75% by the end of the year. This suggests that they’re thinking about raising it just a bit more.
Out of the people who make this decision, 12 said it’s a good idea to raise rates again, but seven said we should keep them the way they are until the end of the year.
The Federal Reserve thinks that in the next year, interest rates will go down by 0.5% from the highest point, which is 5.5% to 5.75%. This means they plan to keep rates high for longer than they thought before.
In June, they thought they would lower rates by 1% in 2024.
One way they check how the economy is doing is by looking at how much prices are going up. Right now, they say prices are going up by 4.2% compared to last year, but it used to be higher earlier this year.
☞ More: What Is Inflation? (And How to Control It)
They also look at another way to measure prices, and it’s going up by 4.3% in August, which is slower than in July.
The head of the Federal Reserve, Jerome Powell, said they want to raise rates because they see the economy getting stronger. When the economy is doing well, they need to control it by raising interest rates.
They still think prices are a bit too high, but they are watching closely to make sure they don’t go too high. They also lowered their guess about how much prices will go up by the end of the year, from 3.9% to 3.7%.
They expect prices to go up by 2.6% next year, which is in line with what they thought in June.
The Federal Reserve also mentioned that job growth has slowed down a bit. They now think the unemployment rate will be lower this year, at 3.8%, and stay that way until 2025.
The economy’s growth, which is measured by something called GDP, is expected to be better than they thought.
For this year, they now think it will grow by 2.1%, up from the previous guess of 1%. Next year, they think it will grow by 1.5%, which is better than the 1.1% they thought before.
The Federal Reserve is being careful about what they do next. They want to make sure they don’t make the economy worse by raising rates too much or too fast.
They are paying close attention to how prices are going up and weighing that against the risk of hurting the economy.
Jerome Powell, the head of the Federal Reserve, said they are getting close to where they need to be. He also said that if they don’t control prices, it can lead to an uncertain and difficult time for the economy.
In simple terms, the Federal Reserve decided not to change interest rates, but they might raise them one more time this year.
They are watching how prices are going up and want to make sure the economy is doing well without prices getting too high.
They also expect the economy to grow better than they thought.
What People Say:
| Comments from Investors |
|---|
| Insider friends of the Federal Reserve might act on investments now, while the public waits for the announcement. |
| Concerns about the delayed impact of rate increases on the economy. |
| Worries about the high national debt, which is around $33 trillion. |
| Belief that interest rates should not have been as low as they were and concerns about government spending. |
| Concerns about government debt and the need for fiscal responsibility. |
| Fear of an economic crisis due to the growing national debt, with uncertainty about when it might occur. |
| Suggestion that reducing government spending and achieving energy independence could improve the economic situation. |
| Concerns about rising inflation and the need to end quantitative easing (QE) policies. |
| Belief that mistakes by high-ranking officials or politicians often disproportionately affect ordinary citizens. |
| Suggestion of an economic reset to address inflated prices in various sectors. |
| Criticism of the Federal Reserve for policies seen as benefiting Wall Street. |
| Concerns about the Fed’s ability to keep up with government spending, particularly in light of the Ukraine situation. |
| Belief that abandoning the gold standard and subsequent monetary policies contributed to the current economic situation. |
| Emphasis on addressing entitlement and defense spending, along with interest on the debt, for meaningful budget impact. |
| Desire for more transparent reporting of inflation rates and suspicion that official numbers may not reflect the true extent of inflation. |
| Stress on the need for the Fed to continue raising rates due to concerns about inflation and low reported unemployment rates. |
| Speculation that a small rate hike might be in the near future, with the possibility that the Fed is working to end the economic cycle with a recession. |
| Emphasis on the premature nature of talk about rate cuts before an official recession and its potential lack of economic understanding. |
(Source: Yahoo Finance)
