In this video I'll cover off why the FED keeps raising interest rates.
While inflation of goods like used cars and furniture is moderating as supply snags ease, Powell said, the price of services such as restaurant visits continues to rise sharply because of persistent labor shortages that force employers to increase wages and, in turn, raise prices.
The Fed has been aggressively raising interest rates in an effort to fight high inflation, which has hit a 40-year high, driven by strong consumer demand for both goods and services. This demand has outpaced the ability of businesses to deliver, putting upward pressure on prices.
By raising rates, the Fed is hoping to cool off demand by making it more expensive to borrow money. The goal for the Fed is to stop high inflation without potentially plunging the economy into a recession.
Federal Reserve officials last week predicted they'll need to raise interest rates more than they previously planned in 2023 to bring down inflation.
The central bank expects to raise rates again to 5.1% by the end of 2023. Rates are projected to drop to 4.1% by the end of 2024 and 3.1% at the end of 2025.
So, How high will Fed raise rates in 2023?
Despite its forecasts, economists expect the central bank to halt its rate hikes sooner if inflation continues to ease and the economy weakens in the coming months topping off around 4.6%.
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