US to undertake higher interest rates, prompt recession
4 Min Read
The US Federal Reserve is looking to keep on increasing interest rates despite the damage the policy is inflicting on Americans without any notable positives.
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A shopper shops in a Walmart store on May 18, 2021 in Hallandale Beach, Florida (Getty)
The United States is undergoing higher inflation rates day by day, and the Federal Reserve is looking to continue embarking on its path of increasing interest rates in a bid to mitigate the soaring prices that are putting a chokehold on Americans.
The Fed has been for the past few months aggressively hiking interest rates to try and lower rising prices, but its efforts did not materialize in May, with consumer prices hitting four-decade highs. Consumer prices in May rose 8.6% and soared over what economists thought was the peak in March.
With several challenges facing the Biden administration, such as Western sanctions on Russia prompting major pressure on global fuel and food prices, analysts are projecting that inflation will be in high gear for longer than expected.
The Western sanctions on Moscow have cut supply chains, pushing Russia out of the global energy market that is already troubled by the uncertainties surrounding supply due to the COVID-19 pandemic.
The US central bank has already indicated that it had plans to hike interest rates on loans this week and throughout July, but it is looking like the Fed is more likely to increase the aggressiveness of its policies put in place to combat inflation. That would drastically affect the national economy and increase the chances of recession.
The latest report on US inflation, the last major one to come out ahead of the central bank's policy meeting on Tuesday and Wednesday, also casts doubt that the Fed would be able to call a ceasefire in September, two months ahead of the midterm congressional elections widely expected to see Biden's democrats suffering seeping losses due to the administration miring the country in various unresolved crises.
The Biden administration has tried to absolve itself from responsibility for the widespread inflation hitting the country, with Biden himself trying to cast the blame on Russia for the record food and gas prices affecting US citizens.
Russia responded by calling these attempts "unconvincing and futile", accusing Biden of trying to shift the blame and evade his responsibilities.
Looks like President Putin is governing the US as well, since he can impose taxes on food and gas. Unconvincing and futile attempt by @POTUS to shift the blame and escape his responsibilities! 👎🏻👎🏻👎🏻 #PriceHike https://t.co/xs2qrUGyze
— Dmitry Polyanskiy (@Dpol_un) June 10, 2022
Prices are still on the same path, rising exponentially over the past month in all sectors, including housing, foodstuffs, airline fares, gas, and new and used vehicles, and, according to data released by the US Department of Labor, the price hikes under Biden are setting new records in multiple categories.
Energy prices have risen 34.6% over the past year, the fastest since September 2005, food prices have increased 10.1%, and the cost of fuel oil increased by more than two-fold, soaring 106.7% - the largest increase in the history of the consumer price index. A gallon of gas across the US reached $5 nationwide for the first time in history, setting a new record for oil prices.
Biden, who blames "Putin's Price Hike" for the hike in inflation, said Washington "must do more - and quickly - to get prices down here in the United States."
He has been urging Congress to pass legislation to mitigate the rising costs of key products such as medicines and services like transport in a bid to curb the damage done to US consumers.
The US Federal Reserve has already acknowledged that its policies of surging interest rates would cause several issues at home, but it still hoped to curb the rising costs of living without severely impacting the economy; however, that is looking to be growing increasingly more difficult for Washington.
The US government's budget deficit shrank by $66 billion in May to $426 billion as additional pandemic-related aid programs expired, according to the Treasury's monthly budget breakdown released on Friday.
