Fed Ends January Meeting Planning to Raise Rates, but Not Until March

The Federal Reserve is going to be raising rates in 2022. This action is desperately needed to fight inflation. But, it isn’t ready to act now.

It has been clear that Federal Reserve Chairman Jay Powell has been about as wrong on inflation as imaginable. He may have acted appropriate in moving the Fed Funds rate as low as possible and flooding the market with liquidity in early 2020 when COVID-19 became a reality. But, for almost two years, he has failed to respond to economic circumstances. Continuing to leave interest rates at zero while inflation diminishes (damages) the real value of the dollar to depositors, has thrown people into wildly inflated assets.

The longer the Fed waits and the more it claims that it is acting slowing and deliberately in order to be transparent, the more pain the economy will risk encountering. And, if Powell is concerned about whether the economy can tolerate a move in the Fed funds rate from its current 0/0.25 to 0.25/0.50, then it is hard to see how it will respond as the Fed funds rate moves much higher which is what it will need to do in order to contain inflation.

For savers, we’d expect to see online savings rates begin to become a little more competitive as we get closer to the Fed’s first and very well projected move in March. And, we’d continue to steer clear of both long-term and short-term CDs.

Meanwhile, it remains a good time to look at looking into a home loan, or to consider refinancing your mortgage if you haven’t done so recently.