Fed’s Slow Pace on Interest Rate Hikes Will Lead to More Inflation and Then Recession

For the first time in four decades, the Fed is behind the curve. That mistake will be costly to all of us.

At their March meeting, the Federal Reserve decided to raise interest rates a meager 0.25 percent. That hike will do little to head off the upcoming double-digit price increases that will begin before summer starts. The Fed’s shockingly irresponsible behavior will do little to reduce inflation. And because of their weak position, when they finally take more drastic action, a recession could follow.

They are raising interest rates because the inflation rate for the past 12 months was 7.9 percent. Without immediate strong Fed action, that rate will increase rapidly. The Fed is a year late raising rates, which is really what led to most of the current inflation problem.

Prior to 2021, the Consumer Price Index (CPI) averaged a monthly gain of about 0.2 percent, leading to an annual inflation rate of about 2.5 percent. Starting in 2021, the CPI increased by 0.3 percent in January, 0.4 percent in February, 0.6 percent in March, and 0.8 percent in April. Obviously, the huge excess demand created by the federal government deficit spending of nearly $6 trillion in the prior two years, coupled with the Fed’s expansionary monetary policy, led to rising…