Never before has the Fed raised interest rates so aggressively and rapidly (see image). In just over a year, interest rates were increased by nearly 5%. Why? Because of high inflation. It is the Fed's task to keep inflation around 2%. But as we know, inflation has been much higher in the past year, peaking at 9.1% in the US. In response, the Fed raised interest rates harder than ever before. As a result, inflation has now been reduced to 4.9%. A step in the right direction, but still well above their target. And that's why the Fed finds itself in a dilemma, which I'll explain below.
The FED's dilemma
The FED's dilemma
The FED's dilemma
Never before has the Fed raised interest rates so aggressively and rapidly (see image). In just over a year, interest rates were increased by nearly 5%. Why? Because of high inflation. It is the Fed's task to keep inflation around 2%. But as we know, inflation has been much higher in the past year, peaking at 9.1% in the US. In response, the Fed raised interest rates harder than ever before. As a result, inflation has now been reduced to 4.9%. A step in the right direction, but still well above their target. And that's why the Fed finds itself in a dilemma, which I'll explain below.