The United States Federal Reserve has a two day meeting on Tuesday and Wednesday of this week, and all eyes are on what the Fed decides to do with the current inflation situation. Most experts think we’re going to get another interest rate increase.
There is also the release of the quarterly GDP report this Thursday, which means this is shaping up to the the busiest — and what could be the most important — week of the summer for the markets. There are also expected earnings reports from some of the country’s largest companies including Apple, Microsoft and Amazon. It’s a head-spinning amount of financial news for one week.
But certainly, the most effect on consumers will be the interest rates. Jill Schlesinger, CBS News’ Business Analyst and host of Jill on Money, says she thinks another three-quarter bump in the rate is coming.
“I think it is most likely we get another three quarters of a one percentage point increase, that’s what we got in June, 0.75%,” says Schlesinger. “Remember, we were like holey moley, that’s a big move. Going to happen again even though we know the price of crude oil is down from over $120 a barrel, now down under $100. Even though the price of gas is down 55 cents per gallon from a month ago, prices are still high and the Fed has to keep fighting the rate of inflation, to try to get this under control.”
CNBC Fast Money host Pete Najarian says this is exactly what the Fed had been hoping to see.
“Some of this has have given the Fed what they kind of needed,” Najarian tells WCCO’s Adam and Jordana. “Quite honestly, they needed something to happen in a positive way and we've watched the price of crude come down. And of course that relates directly towards gas prices, which have come down pretty dramatically, really over the last couple of weeks. So they've gotten that. That part of it has been great.”
Schlesinger, speaking to Vineeta Sawkar on the WCCO Morning News, thinks it is unlikely they add a full percentage point which some thought could happen. She does say there are a lot of questions that Fed Chair Jerome Powell is going to need to answer going forward.
“What is it that Powell sees ahead, when will they lighten up on these increases, how much do they see inflation coming down and how soon,” asks Schlesinger. “Those are the questions I hope he answers.”
With people continuing to struggle with higher prices, Schlesinger says there is a group that is disproportionately affected by increasing inflation and the Fed needs to do something to help.
“We all complain about higher prices, but they disproportionately hurt people who earn under the median household income,” says Schlesinger. “The middle class Americans, I think that’s about $65,000-$70,000 is the median income in the U.S. If you’re making over $100,000 you’re feeling like, ‘it stinks, but I can deal with it.’ If you’re making less, then the problem is this huge portion of your total income is going to what? Housing, food, and energy. Since those things are really seeing big increases still, it puts those folks under pressure.”
Najarian agrees that an increase is on the way and the Fed has been signaling this all along.
“They've been very clear and very transparent when they've given us the idea of what levels they're looking at, and what they think is going to happen,” says Najarian. “So we're looking at 75 basis points that they're going to raise it once again and you know, whether or not they can thread that needle, I couldn't give you the best guess on that.”
Najarian adds that focusing too much on energy and especially crude oil prices is missing a key piece of the inflation issues we’re facing.
“I'm talking mostly about food inflation that we're seeing right now,” Najarain explains. “Whether it's corn or wheat. Or, even getting back to energy, natural gas. If you just took a look at a one week chart or a two week chart, you'd look at that and you'd say, ‘wow, Pete, that thing is going up faster than just about anything I can see right now’. And it is, as a matter of fact, it's approaching eight and a half. It was just down under six, not too terribly long ago.”
Najarian says the global issues we’re facing with Russia and Ukraine, and domestic issues with drought, are going to continue to stress markets and specifically food markets.
Following this week’s likely increase, all eyes will turn to September and what the Fed decides to do as we head into fall with some analysts saying a recession is still looming. While unemployment is currently low, that move could make it very difficult to maintain the current labor markets.
Jill Schlesinger is the host of "Jill on Money" which can be heard Saturdays at 8:00p.m. on WCCO Radio.
Pete Najarians is the host of WCCO's "The Huddle", which airs Sunday mornings at 10:00a.m.
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