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NAR: Fed raising interest rates to 16-year high ‘unnecessary,’ ‘harmful’

The increasing interest rates have been a portend of trouble for many, but this latest hike has many concerned about the potential future.

A woman reads a chart of interest rates, looking over her shoulder at the varying lines and tables, with her head resting in her hands in a stressed gesture

On Wednesday, the Federal Reserve announced a decision that reflects the severity of the ongoing battle against inflation. The key federal funds rate has been raised to over 5%, a level not seen in 16 years.

This marks the 10th consecutive rate hike since March 2022. Notably, the Fed’s statement on the hikes today omitted all language that had previously signaled more rate hikes in the future.

The statement recognized the impact that these rate hikes may have on households and businesses, noting that higher borrowing costs are “likely to weigh on economic activity, hiring, and inflation,” with the full extent of these effects remaining uncertain.

Despite these concerns, the statement acknowledged that job gains have remained strong in recent months, and that the unemployment rate remains low.

Adding onto a challenging downturn

This decision comes at a challenging time when rising prices, interest rates, and slowing growth threaten an economic downturn. For many consumers, these conditions represent the worst financial situation they have experienced since the Covid-19 pandemic disrupted the economy.

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While some financial commentators disagree on how the Federal Reserve should respond to these challenges, most believe that yet another rate hike of 0.25% will come this year, followed by at least two rate cuts before the end of the year, as economic growth continues to slow.

The statement from NAR

Dr. Lawrence Yun, Chief Economist at the National Association of Realtors said, “The latest interest rate hike by the Federal Reserve is unnecessary and harmful. Consumer price inflation has been decelerating and will continue this trend.”

“After the awful 9% consumer price inflation in the summer of last year, the latest data shows 5% inflation,” Dr. Yun added. “It will be even lower as the heavyweight component to inflation, which is housing rent, will inevitably slow down given the 40-year high robust construction of new empty apartment units.”

He continued, “In addition, there is significant additional monetary policy tightening already occurring. The fast rate hikes by the Fed have upended the balance sheets of many small regional banks. They are becoming zombie-like banks, unable to lend even to good businesses as they are more concerned with balance sheet shuffling for survival. This situation will worsen with each additional rate hike by the Federal Reserve.

“Only by stopping the rate hikes or even a reversal later in the year after verifying much calmer inflation rates will the small banks have a better chance of survival against the big banks,” Dr. Yun concluded.

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Lani is the COO and News Director at The American Genius, has co-authored a book, co-founded BASHH, Austin Digital Jobs, Remote Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.


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