The Federal Reserve is expected to raise interest rates far higher than what earlier pronouncements claimed, increasing the likelihood of a slowdown and the collapse of the American economy.
In the most recent meeting of the Federal Open Market Committee (FOMC) held early this month, monetary policymakers in attendance all agreed on the need to keep increasing the Fed’s main interest rate.
The interest rate is usually set between 0.75 percent and one percent. The members of the FOMC are interested in increasing the rate by 50 basis points “at the next couple of meetings,” supposedly to better fight inflation. (Related: The biggest economic crash America will ever experience is coming, warn multiple financial experts.)
Basis points are the common unit of measuring interest rates and other percentages in the world of finance. One basis point is equal to 0.01 percent. A 50 basis point interest rate hike amounts to a 0.50 percent increase.
The policymakers further noted that the Fed’s policy may have to move past a “neutral stance” in which it neither supports nor restricts economic growth.
“Most participants judged that 50 basis point increases in the target range would likely be appropriate in the next couple of meetings,” read the minutes. The FOMC members further indicated that “a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook.”
The 0.50 percent interest rate hike would be in addition to the recently approved rate increase of half a percentage point, which would start in June. The Fed claims that the interest rate hike would help reduce the central bank’s $9 trillion balance sheet, which consists mostly of Treasury Department and mortgage-backed securities. This represents the biggest rate hike in 22 years.
Market pricing estimates the Fed increasing its rates to 2.5 to 2.75 percent at most by the end of the year. This would be consistent with where many central bankers view a “neutral” rate.
The Fed is likely to increase rates beyond this if the statements in the minutes are to be taken as an indication. But minutes of the meeting also noted that the committee members are not unanimous in this belief.
Some FOMC members pointed to some risks to financial stability should the Fed continue ratcheting up its plans in the belief it will control inflation. The members claimed that this meddling could “interact with vulnerabilities related to the liquidity of markets for Treasury securities and to the private sector’s intermediation capacity.”
Fed interest rate increases will lead to a spiral that could collapse the economy
“Bottom line is, the Fed is trapped,” said Ed Dowd, a financial analyst and former portfolio manager for investment firm BlackRock, during an appearance on Steve Bannon’s program, “War Room.”
“There are so many indicators that I follow with some other people that suggest that the rate-hike cycle was over before it started,” said Dowd. “So, they’re tightening into a disaster.”
Dowd warned that continued interest rate hikes from the Fed are one of the first signs that the American economy “is starting to really collapse.”
After inflation continues increasing despite the first few hikes, the Fed will claim that the interest rate needs to be increased a few more times to finally put a stop to the out-of-control inflation.
At the end of this spiral, the Fed will realize it has made a huge policy error and the central bank will not be able to raise interest rates another time “without collapsing the whole system,” noted Dowd. “They’re trapped.”
Learn more about the collapsing global economy at Bubble.news.
Watch this clip from “War Room” as host Steve Bannon interviews Ed Down regarding the converging forces that will destroy the economy.
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