THE FED JUST CRASHED THE MARKET | Major Changes Explained

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THE NOVEMBER 2022 RATE HIKE:

They began by raising interest rates by 75 basis points, which was what the market expected…but, their FINE PRINT caught everyone by surprise:

Even though their intentions were to raise rates so that it’s “sufficiently restrictive to return inflation to 2 percent over time,” they followed that up by stating that they will take into account “the lags with which monetary policy affects economic activity and inflation, and economic and financial developments” – and, this is MASSIVE.

Companies, for example, won’t know their sales numbers until the end of the month or quarter…housing data won’t show up for another 60 days…consumer spending is highly volatile based on a number of factors, and – by the time WE see the end-result of each policy decision, months have already gone by.

By acknowledging these lags, it gives the Federal Reserve enough time to pause, slow down their hikes, adjust as needed, and basically take a “Wait and see” approach without driving the economy into a total disaster.

HOWEVER…the BAD NEWS is that, there is the concern that inflation will become “entrenched” within the economy, meaning that – consumers believe that inflation will continue to rise, and THAT will reach certain categories which are unlikely to come back down, like rent and medical services.

If this happens, it’s possible that we’ll need EVEN MORE rate hikes…and even more pain within the economy…so, to prevent this from happening, the FED mentioned that they may have to take more extreme measures AHEAD OF TIME…and THAT is why the market immediately began falling.

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