Inflation is getting out of control despite the interest rate hikes.

Inflation is Not Easing

Inflation is not easing as the FED would like, currently hovering around 4.4% annualized, far from the FED’s 2% target.

What is the FED rate and where is it now?

The FED rate specifically refers to the Federal Funds Rate, which sets the benchmark for how much it costs to borrow and save money.

The rate has been held at 5.25-5.5% since August 2023. It’s used to control inflation, but inflation remains high, and keeping rates elevated for a long time comes with consequences.

Below, you can see how this rate has fluctuated since 2000.

Let’s remember that the data hasn’t been favorable: high PCE (consumer spending), slowing GDP, and elevated inflation.

All these indicators point more towards a rate hike than a cut, but the FED has clarified that a rate increase is “unlikely.” Just from that statement, the stock market rallied quickly, but it didn’t last long.

The FED is clearly more concerned about high inflation than high rates and their consequences, which we’ll discuss in another post.

Until inflation reaches the 2% annualized target, they don’t plan on lowering rates, which doesn’t seem to be on the horizon with the current 4.4% inflation and other macro data.

However, keeping high rates for an extended period impacts real estate investments, crime rates, and more.

For now, a soft landing seems distant, and with each piece of news, there’s a lot of volatility. It’s a market to watch closely, and in my personal opinion, not a market to be heavily invested in.