Fed will raise rates over 5% amid banking crisis

  • Loretta Mester, president of the Cleveland Reserve Bank, says she expects the fed funds rate to move above 5%.
  • How high and how long “will depend on how much inflation and inflation expectations are moving down, and that will depend on how much demand is slowing, supply challenges are being resolved, and price pressures are easing.”

In late March the Fed raised rates by a quarter percentage point after inflation hit 6% year over year in February. 

  • Rising rates mean that many banks will offer rising returns on their savings and money market accounts (but the speed with which they do this will vary from bank to bank).
  • Since late 2021, investors have been pricing in rate increases sending the S&P 500 in to a deep slump for most of 2022 into this year.
  • With the national debt nearing $32 trillion, rising rates will raise the costs of the federal government as it rolls over debt and borrows new money. 

Jim Rickards:“The problem with any kind of market manipulation (what central bankers call “policy”) is that there’s no way to end it without unintended and usually negative consequences.” (Read in full here.)

Read more about the upcoming rate hikes here.