The Federal Reserve Board voted not to raise interest rates at their October meeting, finally realizing that the runaway freight train of interest rate hikes might be more detrimental to economy than the inflation that they are supposedly fighting.
Did the Fed Stop Too Late
The big question on everyone who actually participates in the economy’s mind is did the Fed stop raising interest rates too late. Already the housing market is seizing up as home buyers realize they have been priced out of homes by higher interest rates and sellers find that they no longer can sell their home in a weekend, or maybe within several weeks.
Higher food prices are still cutting deep, but so are those credit card bills. Variable rate credit cards and HELOCs have spent the last year delivering higher and higher payments to borrowers. Many borrowers who were perfectly fine servicing their debt suddenly find themselves staring down bankruptcy. And we all know what happens when a huge chunk of America goes and declares bankruptcy.
The only high point in all of this is rising wages and low unemployment are keeping more people above water than in the past. In states with rising minimum wages, workers find themselves able to make utility payments, fixed interest rate loan payments, and car payments. Add to that that national pricing via online shopping has no way to charge higher amounts to shoppers in states with higher wages and you might just see a middle-class reemerging. If it weren’t for higher food and gas prices, entire states would not even be feeling the effects of inflation.
Here we go. The holiday shopping season is about to start, and the Fed has already played the Grinch all year long. Let’s see if they can resist one more time and maybe not shatter the economy by depressing the one month a year that retailers absolutely must count on.