Foreign The Federal Reserve is expected to raise Interest rates again tomorrow after Pausing more than a year of rate hikes Last month experts believe the central Bank will increase rates by one quarter Of a percentage Point as part of its Ongoing fight against High inflation Meantime the Bureau of Labor Statistics Reported this month that consumer prices Dropped to 3 percent in June that's Still one percent above the Federal Reserve's target rate if you're having a Hard time following all those Percentages joining us now is Joe Renison he is a markets reporter for the New York Times Joe thanks for joining us The Federal Reserve has raised interest Rates 11 times since 2022 what impact Has this had on the U.S economy and Investors yeah uh so a decent amount of Impact has been had so inflation has Started to fall that's the biggest one And that's the main reason that the Federal Reserve has been raising Interest rates is to try and cool the Economy in so doing so reduce inflation Which I think everyone has been feeling Quite markedly but then it then it also Has spillover effects to the rest of the Economy it has started to play an effect On the labor market and to uh you know Affect the pace of hiring among Companies and it started to affect sort
Of business decisions what companies are Doing investment uh how they're you know Treating their stock things like that so It filters out and it trickles out and That's the intention of it obviously the Concern is whether that goes a little Bit too far and slows the economy too Far and pushes us into something a Little bit you know it's favorable most Experts anticipate the central bank will Increase rates again tomorrow what are The main factors officials will consider In mulling over this decision so it's Pretty much nailed on to be honest at This point uh the FED doesn't like to Surprise markets it doesn't like Surprise investors and the expectation Is overwhelmingly that they will be Raising by another quarter of a Percentage point tomorrow the things They consider and the things that They're making very clear that they're Considering at the moment are incoming Data about the economy so kind of Reflecting the way the interest rates Move through the economy they're looking At the labor market they're looking at Manufacturing data they're looking Across sort of consumer spending how Consumers are reacting how businesses Are reacting and that's kind of what They're looking to make sure that the Interest rates that they're enacting are Having the desired effect so no
Surprises there but obviously this would Be the highest rate funds rate that We've seen since 2001. The question that I know we've talked About for months now that our word could This lead to a recession so uh it Certainly could Um I mean a number of people on Wall Street have actually been dialing down That expectation that was certainly the Consensus view at the start of the year Uh the stock market is up roughly 20 This year the economy has proved far More resilient than anyone on Wall Street really anticipated what do you Attribute that to uh I Um I'm certainly not sure analysts and Folks on Wall Street would probably Attribute it to the strength of the Consumer uh during the pandemic there Was obviously a large amount of stimulus That kind of built up this kind of Buffer of cash in consumers bank Accounts they had a little bit more Savings had a little bit more in the Bank especially with the stock market Which performed very well through the Pandemic that also enriches uh people And gives them additional money to then Spend into the economy and so the Strength of the consumer has really Dumbfounded a number of economists a Number of analysts they've continued
Spending that has allowed companies to Continue raising prices to deal with Inflation so their earnings their Profitability has not really slid in any Way that sort of initial expectations Kind of would have told us and as a Result uh you know as inflation now is Starting to fall and the FED is kind of Approaching its Target of two percent Inflation it's not there yet the sort of Optimism about the economy is rising Does it make it more interesting in Covering these markets well the the Curious Thing is this is also typically What happens before a recession is Optimism gets very very high so there is This other side of caution right that Whilst people are feeling a little bit Better about things what people are Feeling like we might be able to escape A sort of severe downturn that's often When people maybe get a little bit over Their skis maybe start to uh you know Dial in that sort of Hope a little bit Too early maybe and there are risks out There you know there's an awful lot of Debt that was taken on whilst interest Rates were very low there are a number Of companies that are facing much higher Interest costs now as a result of Interest rates going so much higher so There are risks still to that Rosier Outcome maybe not coming to fruition all Right Joe renison thank you for breaking
All of that down thank you take care
