Fed Plans to Tighten Fiscal Policy if Inflation Doesn't Decrease

A Fed minutes article was released Wednesday emphasized that they are prepared to fight inflation even if it causes a deeper recession. This decision was encouraged because earlier this year, inflation in the United States hit its highest since 1981. 

Fed members also shared that they believe another 50 or 75 basis point increase in the federal funds rate in July is possible. This is following the 75-point change last month. The increasing rate is putting substantial downward pressure on the economy, but the Fed plans to keep going if inflation is not slowed. 

The article said, "Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist."

Then it continoued, "Participants recognized that policy firming could slow the pace of economic growth for a time, but they saw the return of inflation to 2 percent as critical to achieving maximum employment on a sustained basis."

The Fed's most recent publication stated a resilient stance to reduce inflation at all costs, but this has put the equities market, US economy, and crypto in turbulent water. Bitcoin had its worst month in history in June, the US saw a 1.6% decrease in GDP in the first quarter, and the S&P 500 has fallen 19% since the start of the year.

It appears the market is in for more difficulty because of the Fed until inflation is reduced.

Author: Garrett Meifert

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