Posted on by

Bad News From the Fed? We’ve Been Here Before.



Share

The Federal Reserve’s decision to raise interest rates again is hardly a positive development for anyone with a job, a business or an investment in the stock or bond market.But it isn’t a great shock, either.This is all about curbing inflation, which is running at 8.3 percent annually, near its highest rate in 40 years. On Wednesday, the Fed raised the short-term federal funds rate for a third consecutive time, to 3.25 percent, and said it would keep increasing it. “We believe a failure to restore price stability would mean far greater pain later on,” Jerome H. Powell, the Fed chair, said. He acknowledged that the Fed’s rate increases would raise unemployment and slow the economy.The outlook is gloomy, but it has been worse before. The last time severe inflation tested the mettle of the Federal Reserve was the era of Paul A. Volcker, who became Fed chair in August 1979, when inflation was already 11 percent and still rising. He managed to bring it below 4 percent by 1983, but at the cost of two recessions, …

Read More