SOME experts believe that the Federal Reserve has raised interest rates many times since last March, to combat soaring inflation in the United States, causing severe negative effects on the real economy.
The Federal Reserve of the United States hiked its benchmark interest rates by 25 basis points on Wednesday to a range of 5.25 to 5.5 percent, the highest level in more than two decades, as it stepped up its fight against inflation.
It is the Fed’s 11th rate hike since the start of its aggressive rate-hiking cycle in March 2022, raising the federal funds rate to its highest level since early 2001.
According to the most recent economic indicator, the U.S. consumer price index dropped to three percent year on year in June, the lowest since March 2021, but still above the central bank’s goal range of two percent, implying that more policy action may be required.
“The Federal Reserve formulates its monetary policy mainly based on the observation of economic data. At present, the inflation rate is still at a high level, although its downward channel has been relatively stable. The tightening policy of the Federal Reserve will put greater pressure on the U.S. economy, especially the unemployment rate and economic growth, and people still expressed considerable concern.”
From December to May, the M2 money supply (M2) in the United States dropped for six months in a row. Also In the first quarter of this year, the annualized growth rate of the U.S. GDP has decreased to 2%.
Furthermore, domestic private investment declined 8.05 percent year on year. Industrial and commercial loans in the country fell for three months in a row from March to May.
Now, the impact of rising interest rates is being seen in all sectors of the US economy.
“America’s latest private investment has begun to show a substantial decline. At the same time, the industrial and commercial credit of commercial banks has also declined significantly. The repayment pressure on residential mortgage loans is gradually increasing with the rise of interest rates. Therefore, there may be a downward pressure on the real estate market and household consumption in the United States in the future. In fact, the U.S. economy is gradually turning to a new trend of slow economic growth.”
According to the most recent S and P Global survey, overall business activity in the United States has dropped to the slowest level in nearly five months.
