The Federal Reserve wants to reduce inflation by increasing interest rates, not to cause a recession that would be detrimental to Americans in numerous ways. A widespread downturn is the last thing the Federal Reserve desires. If the Federal Reserve has its way, rate increases will result in a moderate slowdown in consumer spending, which will help to control inflation without throwing the economy into a tailspin. But finding that equilibrium is very difficult. It is unsure that a recession won’t occur shortly or that stimulus checks won’t be issued to Americans once more because the central bank hasn’t stopped raising interest rates to combat inflation.
Increase In Inflation
Since the 2nd half of 2021, customers in the United States have struggled with inflation. And by this time, many people have run out of savings or are deeply in debt from using credit cards to pay for necessities like food and essential expenses. According to the Consumer Price Index for that month, the yearly rate of inflation stood at 6% as of February. Compared to mid-2022, when inflation climbed to 9.1%, this is an increase. The Fed desires inflation to be at 2%, but as of now, we’re not even close to that level. The Federal Reserve raised interest rates for the first time this year in February, and earlier this week it did so once more. Both rates increase for 2023 totaled 0.25%. But since the Fed started increasing interest rates in early 2022, borrowing expenses have been skyrocketing.
Stimulus Check As American Rescue Plan
In the past, lawmakers have used stimulus checks to bolster the economy during protracted downturns. By providing people money to spend at a time when manufacturing processes were slowing down, the American Rescue Plan, for instance, sent $1,400 stimulus payments into consumers’ bank accounts in March of 2021. It is these stimulus checks that are credited with helping to fuel inflation. A recession might occur if the Federal Reserve’s interest rate increases result in a significant decline in customer spending. Furthermore, if the recession is severe, the federal government may once more provide stimulus assistance reports fool.
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