Fed Raises Rates by 25 Basis Points, Here's What Happens Next
Fed called inflation 'transitory' for months
The Federal Reserve announced today that it raised its benchmark interest rate by 25 basis points to a target range of 4.5 percent to 4.75 percent, which is the highest level in well over a decade.
The Federal Open Market Committee (FOMC) said in a statement that it “anticipates that ongoing increases.”
Last January, we had forecast that it would be a negative year for the equity markets… which it was. Beyond the negative socioeconomic and geopolitical implications that brought it down, it is also important to analyze the trends. (Subscribe to see our FULL ECONOMIC UPDATE IN THIS WEEK’S TRENDS JOURNAL)
It is a fact that the S&P 500 index has slumped during midterm elections in the U.S., which it did in 2022. However, the data also shows that in the 12 following months of the last 40 midterm elections, the S&P has gone up some 16 percent.
Staying on-trend, it has been a happy post-midterm election New Year for U.S. equity markets. The tech-heavy Nasdaq—despite the massive layoffs in that sector which we have detailed for the past 25 weeks—jumped some 10 percent, while the S&P 500, which had its best January since 2019, was up over 4 percent and the Dow climbed 1 percent.
So where are the markets headed?
Stocks were trading lower shortly after the Fed’s announcement but regained some ground while Fed Head Jay Powell spoke to reporters. Mohamed A. El-Erian, the economist, tweeted, “Stocks just took a leg up on Federal Reserve Chair Jay Powell characterizing financial conditions as having tightened quite a bit in the last year. (Not sure which index he is using. The most widely cited ones show overall financial conditions as loose as they were a year ago)”
The “official” inflation rate at 6.5 percent, interest rates are in negative territory… and far above the 2 percent inflation target that the Feds invented in 2012. And when using the real U.S. inflation rate before the standards were rigged by the Washington crime syndicate, according to Shadowstats, inflation is actually around 16 percent. Thus, real interest rates are deep in negative territory which will be positive for equity markets.
TREND FORECAST: The Fed’s move to raise the interest rate 25 basis points is positive for gamblers on The Street, but it will not be positive for the nation’s economy or the plantation workers of Slavelandia, of which, according to the latest data, 64 percent are living paycheck-to-pay-check.
As we have detailed, consumer spending, of which some 70 percent fuels the U.S. Gross Domestic Product, has been on a down-trend in three of the past four months. Thus, as interest rates go higher consumer spending will decrease.
What is long forgotten was that the U.S. economy and equities should have crashed when politicians imposed draconian lockdown mandates to fight the COVID War that destroyed the lives and livelihoods of much of the nation as businesses, schools and lives closed down and people were forced to shelter-in-place.
Instead, the government pumped in some $6 trillion of fake money to the peasants of Salvelandia and businesses while the Bankster Bandits brought interest rates to zero… both of which artificially propped up the economy—including the housing boom—and equities.
It also propped up the personal saving rates which hit 7.5 percent last December 2021, but sunk to 3.4 percent this past December 2022. Thus, with the lack of cheap money and inflation costing people to pay more to buy less, in the third quarter of last year credit card debt spiked 15 percent …the largest spike in 20 years.