This article explains how the FED is “deadly serious about reducing inflation” and does not wish to stop until inflation is at 2%. Lower inflation rates seem appealing, however, lowering inflation rates will increase interest rates. Fed Chair Jerome Powell explains “these steady increases will almost certainly mean higher unemployment and weaker economic growth until inflation is fully tamed, but a failure to restore price stability would mean far greater pain.” Since the Federal Reserve fed national debt, debt is about to become a lot more expensive, straining the government and possibly roiling the global financial system. The Fed’s tightening will push the United States closer to a dilemma that cheap debt has allowed it to avoid for years. Therefore the government will have to either raise taxes or cut spending. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, explains that neither option is good because “whether you’re a big government person who wants to spend a lot more, or a small government person who wants spending to come down, neither of those gets first claim to the dollar. The first claim on dollars is always interest payments.” For more information on the FED’s decision to increase interest rates, click the link.
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