How the Federal Reserves interest rate hike could help bring inflation down

The Federal Reserve announced a 0.25% interest rate hike — the first increase since 2018. The Wall Street Journal’s chief economics correspondent Nick Timiraos, author of “Trillion Dollar Triage: How Jay Powell and the Fed Battled a President and a Pandemic and Prevented Economic Disaster,” joins CBS News to explain what this means for American consumers.

Numeric it was a busy day on in light of the interest rate hike announcement, the dow started the day in positive territory, and then dropped right after the announcement at but then, the industrial was positive in the back end of the day over 500 points. >> the s&p 500, and the nasdaq both end of the day. the nasdaq more than 3%. is a chief economic correspondent

At the wall street journal and the author of trillion dollar triage. how about the president and epidemic and prevented economic thank you so much for joining us as we reported the federal reserve raised, the interest rate by a quarter percentage today, how is that announcement affecting the markets. >> thanks for having me as odd, because the feds announcement

Today, not just that they were raising interest rates today, but they put out trajectory showing that they think they’re going to raise rates at every fed meeting this year, there are six more meetings, the fed has not raised interest rate that much in a year since 2005. investors may be reacting to developers in europe. let me be one of those days where the benefit of

Lower oil is swamping the concern that you would otherwise be, i think from having higher interest >> yeah, nick. it’s an interesting sadistic that you give us, 2005 was the last time there were so many interest rate hikes, and, this is actually just the first of 7 interest rate hikes. so, tell us what all this means for the average american can. >> well,

So, the fed is doing this because inflation is too at supply and demand are out of whack here that is why prices the fed cannot do anything about supply-chain bottlenecks about oil shortages, so the feds tools, you know, you heard powell say we will use our tools to prevent inflation from being too high, he is saying that they’re going to have to slow down the economy,

You know, potentially and so, the fed can reduce demand. and, that will mean fewer jobs. the fed does not want to see rate wages run at levels that will push them higher. so that’s one way it’ll affect american consumers. the other of course is it’s getting more expensive to take mortgage rates are going up, credit card rates are going up. we may see little bit of an

Increase in yields on our savings accounts, but not very >> we knew this was going to 25 basis points in this meeting. other events happening around this change the plan for the fed ? and how much does it impact your thinking question >> it creates uncertainty, for i think the more important point is, the fed came into this your thinking that they would get a

Break on inflation that the supply-chain bottlenecks these, and that prices particularly for goods like cars, which have seen extreme in price increases last year, that he would get some help there and that would bring the war in ukraine, the lockdowns and trying to interfere with all of that, so, you know, it’s one thing to have a plan, but no epithet has been punched in

The face, they all went to get the help on maybe they get it later this and, so, what that does is it forces them to say that they’re going to raise interest rates more this year than might have been the case two or three weeks ago before the war, and before we had these new covid lockdowns in china. >> interesting too, you’re the first person i heard described as

Being punched in the face. 2010 was the lasttime we had is the fed late really and raising interest rates, should have been doing this sooner and how is the in increasing the interest rate help the federal reserve combat this inflation. four well, hindsight is 2020. is the fed on inflation is going to be this high, the beginning of 2022, then yes, they would have moved

Faster last year to remove stimulus. i’m not sure how much of a difference it would have made because again, we have things from the pandemic like shortages for semi conductors that were driving prices i think the challenge now, if you think back to two years ago he wanted them to catch up, he said he feels like we are swimming after a speedboat, and they did catch up, the

Question now is can the fed get into the right gear, here where they are raising interest rates faster to put the economy in a better place to slow down inflation, but without going so hard and so fast, they cause a recession, powell was asked today about recession risks, and he said he did not think a recession is likely in the next year, but you never really want to hear

The fed chairman being asked about a recession. >> yeah, that came up and also concerns about a recession have are you concerned that that can happen in the short term? >> well, if you listen to what the church said today, he’s playing to a strong economy, that’s all true, but he was also saying that the labor market is too tight, and the way that the fed deals

With that is to raise interest rates to increase unemployment, and usually, when you increase unemployment a little bit, you increase unemployment a lot, because we have a recession. can they slow the rate of growth in the job market question mark can they get more people to come back into the job market so that the wage pressures are not as intense as they are right now.

If they can do that, then yes, maybe we have a soft landing,

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How the Federal Reserve’s interest rate hike could help bring inflation down By CBS News