Pictured – Federal Reserve Chairman Jerome Powell
Cookeville – Today, the Federal Reserve unanimously hiked interest rates, for the fourth straight month, by 0.75% to a range of 3.75% to 4%. They also stated the expectation is to continue with further rate hikes “until they are sufficiently restrictive” to return inflation to 2%. That is the most aggressive tightening campaign since the 1980s.
The increase sets the interest rate at its highest level since before the financial crisis in 2008. Last month inflation increased the price of goods, including gasoline, groceries and rents, by 0.4%.
Inflation is running at 8.2%.
“Our job is going to have to take some resolve, and some patience, over time,” said Federal Reserve Chairman Jerome Powell in a press conference. “But we know what our objective is and what our tools can do.”
That rate of inflation is nearly a 40-year high. Raised interest rates on consumer and business loans cause businesses to cut back on spending which slows the economy on both a national and local level. The increased interest rates on loans, and supply chain uncertainty, may force businesses to raise prices. A trip to a restaurant or gas station can become restrictive for families.
What about those brave few in Upper Cumberland looking to take a chance and start a new business? They may just look again. Will the economy crash back to earth or will it come in for a soft landing?
Powell said the window is tightening on a smooth landing.
“Has it narrowed, yes,” continued Powell. “Is it still possible? Yes. We have always said it is going to be difficult, but I think, to the extent rates have to go higher and stay higher for longer, it becomes harder to see the path. Its narrowed. The path has narrowed over the course of the last year.”
According to the U.S. Chamber of Commerce, recently 85% of small business owners said they were concerned about the impact of inflation on their business, and 33% of small business owners ranked inflation as their highest concern. In response to inflation pressure, 67% of small business owners have raised prices.
This is a developing story. Check back for updates.
