The Fed’s rate hikes will hurt. That’s unavoidable. – InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading Newswires
Topics
    • Life Insurance News
    • Annuity News
    • Health/Employee Benefits
    • Property and Casualty
    • Advisor News
    • Washington Wire
    • Regulation News
    • Sponsored Articles
    • Monthly Focus
  • INN Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
Sign in or register to be an INNsider.
  • Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
  • Insider Pro
  • About
  • Advertise
  • Editorial Staff
  • Contact
  • Newsletters

Get Social

  • Facebook
  • Twitter
  • LinkedIn
Advisor News
Newswires RSS Get our newsletter
Order Prints
September 23, 2022 Newswires No comments
Share
Share
Tweet
Email

The Fed’s rate hikes will hurt. That’s unavoidable.

Bennington Banner (VT)
ANOTHER VIEW

The Federal Reserve raised interest rates Wednesday by 0.75 percentage points, the fifth rate hike this year in the central bank's crusade to tame inflation. Fed Chair Jerome H. Powell said more increases are likely - and they will hurt, slowing growth and weakening the labor market. Unfortunately, there is no other good option.

Inflation must be stopped. Mr. Powell stressed that Americans are already suffering from rising prices, and low-income people have been hit the hardest. Higher prices for basics such as food are eating up the wage growth people are seeing.

Related stories

  • Fed slows rate hikes even as Powell says there's more work to do
  • Mortgage rates in U.S. fall again, hit 6.09%

The problem will only accelerate, and become harder to fix, if the nation's leaders fail to tackle it now. "I wish there were a painless way to do that," Mr. Powell said.

"There isn't."

The Fed offered a road map. Accompanying substantial rate hikes, the central bank now projects that the economy will grow a mere 0.2 percent this year and expand at a still-weak 1.2 percent rate next year.

Unemployment will rise from 3.8 percent this year to 4.4 percent in 2023. Mr.

Powell warned that it is possible the United States could slip into a recession. Yet the Fed also projects that inflation will fall substantially, setting up the country for long periods of sustainable growth in the future, according to Mr. Powell.

Mr. Powell, as did many others, failed to anticipate the inflationary surge. Yet he is encountering increasing opposition in his fight to redress that error, and the debate will become only fiercer as higher interest rates are felt. Many have already retreated into familiar ideological camps.

Prominent progressives have attacked Mr. Powell's war on inflation, arguing that subsidizing U.S. manufacturing and creating new social programs would bring down prices. Some conservatives insist that the solution is lower taxes and less regulation, the same prescription they offer for any problem. These proposals obscure the essential point: As long as demand outpaces the economy's capacity to supply goods and services, prices will rise.

There are only so many ways to increase supply in the short run, and supply chain improvements or an end to the destabilizing Ukraine war are not guaranteed. Therefore, the Fed must restrain demand by making it more expensive for companies and individuals to borrow and invest.

This is a bloodless way of saying that the job market, wages and economic growth - and many of the people who depend on them - must suffer to avoid even worse economic conditions.

Harvard economist Lawrence H. Summers warns that, in the 1970s, observers engaged in much the same thinking that many Fed critics do today in an effort to avoid such pain. The result was ruinous stagflation, which punished low-end workers the hardest and required a deep recession to finally crush.

Inflation is not as bad as it was at its 1970s peak. There is hope that the Fed will manage to restrain inflation without tipping the economy into recession, achieving a so-called soft landing.

This would require deft timing on the size and pace of interest rate hikes, which in turn would require Fed officials to successfully predict the future. Doing so is particularly hard because interest rate hikes take time to translate into lower inflation numbers.

But the Fed must avoid wishful thinking, even as more people in Washington howl. Mr. Powell is doing just that, and he deserves Americans' forbearance.

- The Washington Post

Older

US economic barometer drops for sixth month in a row, potentially 'signaling a recession'

Newer

The Fed's monetary malpractice will cost you

Advisor News

  • Fed slows rate hikes even as Powell says there's more work to do
  • Mortgage rates in U.S. fall again, hit 6.09%
  • 1 in 3 Americans struggling financially but goal-setting is a game-changer
  • Advisors bet on US stocks to outperform in 2023 amid tech rebound
  • Investors want more ESG information from companies
More Advisor News

Annuity News

  • Study: Does pessimism really suppress annuity sales?
  • Sweet streams of income: ChatGPT, the bard of annuities
  • F&G Annuities & Life announces equity investment in life IMO SYNCIS
  • Investors scrambling to lock in rates propel annuity sales to record highs
  • North American and Annexus launch new fixed index annuity
Sponsor
More Annuity News

Health/Employee Benefits News

  • State: all insurers failed to comply with Oregon Reproductive Health Equity Act
  • Will plan fix California health care?
  • Insurance giant Elevance to move into 15th state
  • Medicare card scam targets seniors for personal info
  • Yes, states are re-checking Medicaid and CHIP eligibility starting in April
More Health/Employee Benefits News

Life Insurance News

  • Chris Wilson tells court former friend Murdaugh confessed he was ‘stealing money’
  • State's motive testimony could prolong Alex Murdaugh murder trial
  • Equitable expands portfolio in VUL market
  • New date set for billionaire suspect accused of bribing state cabinet member
  • House approves bill protecting life insurance payouts from bankruptcy
More Life Insurance News

- Presented By -

Top Read Stories

  • Chicago news roundup: PPP fraud uncovered in Chicago, informant reveals $100K bounty on FBG Duck and more
  • Gov. Carney: Enrollment on Delaware's Health Insurance Marketplace for 2023 Reaches All-Time High
  • 25 people charged in fake nursing diploma operation
  • Missouri Department of Insurance: Over $24 Million Returned To Missouri Insurance Consumers In 2022
  • Connecticut addressing broker shortage amid The Great Unwinding
More Top Read Stories >

FEATURED OFFERS

Meet Encova Life
We know agents matter. You can count on our life team to be high tech, high touch and responsive.

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

Topics

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits
  • Property and Casualty
  • Advisor News
  • Washington Wire
  • Regulation News
  • Sponsored Articles
  • Monthly Focus

Top Sections

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits News
  • Property and Casualty News
  • AdvisorNews
  • Washington Wire
  • Insurance Webinars

Our Company

  • About
  • Editorial Staff
  • Magazine
  • Write for INN
  • Advertise
  • Contact

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2023 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • AdvisorNews

Sign in with your Insider Pro Account

Not registered? Become an Insider Pro.