Fed Dead Set to Stop Inflation at All Costs

  • Fed “Doves” express central bank’s aim to stop inflation at any cost
  • Survey shows Americans believe inflation is their top concern and a recession is coming
  • Inflation fears keep gold in demand despite rising interest rates

Fed “Doves” Commit to Aggressive Rate Hikes to Stop Inflation

Fed Governor Lael Brainard and San Francisco Fed President Mary Daly spoke Tuesday. They stressed the central bank’s commitment to fighting inflation with higher interest rates. “It is of paramount importance to get inflation down,” Brainard said. Raising rates is necessary to ensure that “you’re not worrying about whether prices will be higher, considerably higher tomorrow,” Daly added. She that said inflation running at a 40-year high “is as harmful as not having a job.” She stressed, “we’re not going to let this go forever.”1

Their comments carried more weight because they are considered the Fed “doves”. Brainard and Daly usually favor low rates. They also prefer less restrictive policies. Their urgency shows how seriously the Fed is taking the threat of inflation.

Brainard also wants to reduce the Fed’s $9 trillion balance sheet at a breakneck pace. The bank’s massive bond-buying program was designed to support the economy during the pandemic. It would be cut as soon as May.2

Major stock market averages closed considerably lower after their announcement.

Fed Dead Set to Stop Inflation at All Costs

Inflation is Everyone’s Main Concern

Inflation is costing the average U.S. household an additional $296 per month. Experts expect it to get worse before it gets better.3

A CNBC and Acorns survey showed that 76% of Americans worry inflation will force them to rethink financial choices. People are most concerned about gas prices, housing costs and food costs. In the last year, gas spiked 38%, shelter rose 4.7% and food prices increased 7.9%.

People’s fears are not unfounded. The USDA’s Food Prices Outlook for 2022 March report said that all food prices are predicted to increase. They expect a 5% rise in food prices this year alone. And that’s on top of all the other increases consumers faced over the past several months.

The survey also showed that Americans are unhappy with the White House. 61% of people surveyed disapprove of how President Joe Biden is handling inflation.4

Americans are also very concerned about an economic recession. 81% of respondents believe one is likely to happen this year. They aren’t alone. Deutsche Bank on Tuesday became one of the first big banks to predict a U.S. recession. “We no longer see the Fed achieving a soft landing. Instead, we anticipate that a more aggressive tightening of monetary policy will push the economy into a recession,” the Deutsche Bank economists. Other analysts currently predict a 30% chance of recession. 5

Gold Stays Strong

Gold prices steadied on Wednesday. Concerns over high inflation offset fears of aggressive interest rate hikes.

Meanwhile, rising inflation and safe-haven demand resulted in extraordinary sales of physical gold in March. The U.S. Mint saw its strongest gold bullion demand in 23 years. They reported that sales of American Eagle Gold bullion coins were up 73% from last month.6

The Fed is determined to stop inflation at any cost. However, their actions may cause extensive collateral damage to the economy. People who are interested in protecting their retirement funds should act before the Fed’s plans are in full effect. Contact AHG about a Gold IRA today.

1. https://www.cnbc.com/2022/04/05/-key-people-from-the-fed-just-spooked-the-markets-heres-what-they-said.html
2. https://www.cnbc.com/2022/04/05/-key-people-from-the-fed-just-spooked-the-markets-heres-what-they-said.html
3. https://www.cnbc.com/2022/04/05/inflation-fears-force-americans-to-rethink-financial-choices.html
4. https://www.cnbc.com/2022/04/05/inflation-fears-force-americans-to-rethink-financial-choices.html
5. https://thehill.com/news/3260164-deutsche-bank-predicts-2023-recession-for-us/
6. https://www.kitco.com/news/2022-04-04/U-S-Mint-sees-strongest-gold-bullion-demand-in-23-years-sells-426k-ounces-in-Q1.html
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