The Federal Reserve agreed to raise interest rates .75% at their Wednesday meeting this week. This is the first time in history that the Fed has raised by .75% in three consecutive months. The move comes as efforts to curb inflation continue. The amount of the increase was largely expected after the August inflation report came in at 8.5%, year over year. While this was a decrease from the 8.6% seen in July and the 40-year high of 9.1% in June, it was not the drop consumers were hoping for.
Stocks fell after the announcement, with the DJIA finishing down 525 points, or 1.7%. Fears of recession and further selling pressure persist as Fed commentary indicated more increases are coming before year-end.
At the current 8.5%, inflation numbers are still far from the Fed’s target of 2%. Hopes are these rate increases will help sooner rather than later, before the economy drastically suffers. The Fed has made it clear that at least for now, managing inflation is more important than risk of recession. The Fed meets two more times this year, on November 1-2, and December 13-14.
Call us with your questions and concerns about inflation and how it affects your portfolio. Challenging markets also create opportunity. Making knee jerk decisions almost always causes more harm than good. Remember, stocks have typically been the best way to combat inflation. We’re available to talk anytime.