Jerome Powell, the Chair of the Federal Reserve has a clear message for everyone:
‘We will keep increasing interest rates until inflation in the US is at the target 2% rate’
Translation: We will deliberately slow down the US economy, because we pumped it up with too much stimulus during the last two years, bringing inflation to record levels. There is pain incoming folks. Get ready.
Now, if you’re someone who doesn’t pay attention to these things you’re probably wondering what the BIG DEAL is with these rate hikes?
You’re going to wake up tomorrow & the sun will rise. Ambani & Adani will still be rich. Metros will still be crowded. It will still rain when you’re in a hurry.
Life, goes on isn’t it?
Until one day you might get a call from your bank informing you that the interest on your floating interest home loan has increased a tiny bit.
You might read about employees getting laid off as companies look to reduce costs. Your bonus getting trimmed off. Startup funding drying up. A sell off in the equity markets. Your crypto investments falling significantly in value.
You’ll scratch your head trying to figure out what’s happening. You might find some answers in the decisions Mr. Powell makes.
You see, the economy is a game. A dangerous [and exciting] one, with a lot of players.
The central banks of the world have the cheat codes (interest rate cuts & hikes) with which they control the booms & the busts in the economy.
The biggest player of this game?
The Federal Reserve
Keep a close eye on this player & you might learn how to play this game yourself.