US Economy And The Market Brace The Federal Reserve’s First Rate Hike After More Than 3 Years
If everything goes accordingly, the US Federal reserve after two months can increase the rate. And if it happens, it will happen once in the last three years.
This is a move that policymakers think to be necessary, on the other hand, the market and the economy reluctant to accept.
Last time, Fed raised the rate in the second half of 2018. It was a part of the “normalization” process that did happen in the decreasing time of the USA’s longest-lasting economic expansion.
The longest-lasting expansion is called due to its 10 consecutive years of growth. The National Bureau of Economic Research reported that the USA had a growing period from 1991-2001, almost 120 months of growth that no nation had ever seen earlier. However, from 2009, the growth has become sluggish. GDP growth became 25% slower.
So, the traders are now more vigilant to the market as the Fed is returning to the more conventional monetary policy. In the first trading sessions, Wall Street experienced that the market is trying to keep pushing higher amidst the whirling situation.
Chief investment strategist Jim Paulsen said at the Leuthold Group “When you look back historically on the Fed, it’s usually multiple tightenings before you get in trouble with the economy and the markets”.
Jim expects that the rate hike must be between 0.25%-0.5percent. He said, “We’ve developed this attitude on the Fed based on the last couple decades where the economy was growing at 2% per annum” he further added, “…if the Fed even thinks about tightening, it’s damaging. But we don’t live in that world anymore.”
The Fed is decidedly hiking the rates because of the pressures of inflation that are running by some measures. Policymakers including Jerome Powell spent most of the time in 2021 insisting on the ease of the prices but agreed toward the end of the year that the trend was not “transitory” anymore.
Glenda Bozeman – Business and Services
Glenda Bozeman writes Business articles for industries that want to see their Google search rankings surge. Her articles have appeared in a number of sites. Her articles focus on enlightening with informative Services sector needs. She holds the degree of Masters in Business and Marketing. Before she started writing, she experimented with various professions: computer programming, assistant marker, and others. But her favorite job is writing that she is now doing full-time.
