After raising interest rates nine times from last March to this March, the Federal Reserve Bank is expected to deliver another 25-basis point hike Wednesday during its May meeting.
Some predict that this increase will mark the end of the marathon run of hikes, but others are skeptical. Guy Williams is one of them, and he told WWL’s Newell Normand why this week.
Interest rate increases are an approach the Fed uses to bring down inflation, which has been high in the U.S. for more than a year. In March, inflation again rose slightly, per the U.S. Bureau of Labor Statistics.
“I mean, what's the end game?” asked Normand, who mentioned the Fed’s goal to get inflation down to 2%. Chair Jerome Powell reiterated this goal in March.
“So, they’re hoping to get to 2%. looks like it’s going to be a little longer slog, though, than they thought,” said Williams. “The real hope... a lot of things are slowing down. You know, consumers are beginning to run out of money.”
According to Williams, shipping is a key industry to watch when it comes to predicting interest rates going forward.
“The shipping industry is seeing definitely a turn down,” he explained. “So, rates for shippers are down, which means demand is down. So, the likelihood is this is the end of it. The challenge for the Fed is if it's not the end of it, then you really are going to have to push pretty hard to get unemployment to increase in order to end inflation.”
Williams also noted that increasing interest rates, which in theory slows down the economy by making it more difficult to borrow money.
“There are a lot of ways to reduce inflation,” he said. “One is to increase supply. The other is to decrease demand and to have people lose their jobs and businesses close. There’s not much effort to increase supply, but a real push to reduce demand.”
Normand and Williams also addressed bank failures and the strength of the U.S. dollar. Listen to their full conversation here.
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