How The U.S. Tries To Control Inflation

Americans are experiencing inflation at a rate not seen since the 1980s. Increased cost of goods and services are hitting the wallets of consumers. America’s central bank, the Federal Reserve, is poised to increase interest rates throughout 2022 to combat inflation by making it more expensive to borrow. In the last two years during the Covid-19 pandemic, the Federal Reserve has utilized a number of tools to control the United States economy.

To prevent breakdowns during emergencies, the Federal Reserve, can inject cash into the financial sector. One way it does so is through the large-scale purchase of bonds. The central bank has racked up nearly $9 trillion in bonds to calm investors during past crises. The pace at which the Fed tightens monetary policy may create substantial market headwinds. Members of the Federal Reserve are debating how quickly to reduce the central bank’s portfolio of bonds, without starting a recession.

In 2021, inflation rose at a rate not seen in more than three decades. Congress gave the Federal Reserve a mandate to maintain stable prices. The bank, with its power to lend and set interest rates, is getting a test in the form of a snarled supply chain and a world continuing to recover from the pandemic. As a result, economists across the spectrum wonder if the Fed can control this bout of price spikes.

Lawrence Mishel, a distinguished fellow at the Economic Policy Institute, says, “There’s a lot of reasons to think that inflation is transitory. It doesn’t mean it’s going to be two months, it could be a year, but it’s not going to be, you know, 4 or 5% a year for the next five years.”

Leaders at the Fed have a long-term target of about 2% inflation. They believe that this rate could produce a healthy and stable economy. But shrinking union membership and the expansion of global trade may have made that difficult to achieve. As a result, the central bank is taking a stance that will invite slightly higher levels of inflation for longer periods of time.

Segments:
00:00 - Can The Fed Sell Its Assets Without Starting A Recession? (March 2022)
13:11 - Can The Federal Reserve Control Inflation? (December 2021)
28:45 - Will Economic Stimulus Cause Inflation? (July 2020)

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How The U.S. Tries To Control Inflation

[johnben]

Economists and business leaders are voicing concerns at the start of 2023 that the year could be a difficult one. JPMorgan Chase & Co. Chief Executive Jamie Dimon said that the Federal Reserve may need to raise interest rates to 6% to fight inflation, higher than the peak level between 5% and 5.5% in 2023 that most Fed officials penciled in after their December meeting. Although I read an article of people that grossed profits up to $500k during this crash, what are the best stocks to buy/short now or put on a watchlist.

[susannnico]

This is financial advice and I never give financial advice: DONT LEAVE DURING THE BEAR. If you don’t want to invest…learn. If you don’t want to learn…build. If you don’t want to build observe. DO SOMETHING…other than leave. There is so much opportunity here. Take advantage!

[Muller_Andr]

inflation remains well above the Fed’s 2% target. Some of the top commentators in the markets, business and economics have been sounding off on just how bad they think the next downturn might be — and how far stocks may have to fall. I need ideas and advice on what investments to make to set myself up for retirement, my goal is to have a portfolio of at least $850k at the age of 60.

[andrew.alonzo]

My greatest concern is how to recover from all these economic and global troubles and stay afloat especially with the political power tussle going on in US.

[ClementRusso]

Predicting the future remains uncertain until we have this month's inflation data. Nevertheless, historical trends consistently demonstrate that stocks tend to outperform bonds over the long haul. Hence, I'm staying invested in the market and concentrating on choosing top-notch stocks. The real difficulty lies in pinpointing these standout stocks.

[Patriciacraig]

You need to invest in order to protect your hard-earned funds from inflation. You need to invest now because your money is more valuable today than it will be in a year.

[akibeekymre]

To my understanding this just proves how much we need an edge as investors because playing the market like everyone else just isn’t good enough, we just need to hold onto our hopes and wait to see how things turn out because market movements are almost always unpredictable. In my portfolio, I'm noticing more red than green.

[ChristopherAbelman]

Major indexes booked their worst yearly performance since 2008 thanks to drivers like the recession, war, hiked interest rate and inflation which so far doesn’t seem to be easing off, so I’m left wondering what 2024 has in store for us investors, I’ve been sitting on over $745K equity from a home sale and I’m not sure where to go from here, is it a good time to buy or do I wait?

[carter]

nteresting how 2% inflation has been a concern when central banks and the Fed begin to hike interest rates. I consider the rising interest rate to be a very serious issue since it will undoubtedly cause more investors to withdraw their money from the stock market. This may have worked when I was only using a few thousand dollars to invest, but it is more challenging to decide to withdraw more than $365, 000 from my account at this point. Despite the severe bear market, I am aware of certain investors that continue to earn that amount. I wish I could accomplish that.

[alexyoung]

With inflation currently at about 10%, my primary concern is how to grow my reserve of $240k which has been sitting duck since forever with zero to no gains, sure I'm all in on the long term game, but with my savings are lying waste to inflation and my portfolio losing gains everyday, I need a remedy asap.

[johnlennon]

My portfolio has good companies, however it has been stalling this year. With the present inflation and dollar devaluation I just got my money out of the bank, I invested some in gold and silver and I’ve approximately $700k stagnant in my reserve that needs growth, any suggestions to grow my portfolio will b

[LuvmeRos]

My main worry, given the current rate of inflation, is how to increase my $300k reserve, which has been sitting stagnant for a very long time with little to no gains. I understand the long-term strategy, but since my savings are being eaten up by inflation and my portfolio is losing value every day, I need to find a solution quickly.

[curtissjody]

Inflation is killing my budget and my salary. I can't invest and it seems like I will need to sell a part of my portfolio to keep my head above the water this year << stocks and crypto >>

[DragonKingGaav]

The title should be, How The U.S. is FAILIING To Control Inflation

[Xander-dxmw]

For having been released just 6 hours ago, there are an epic amount of errors.
28:20 - the American rescue plan may not have created inflation, but it stood over the fire and poured gas directly on the fire.
31:20 - there is literally no assets that Americans can buy and stock up on that will insulate you from inflation. People may buy something earlier than planned, but they will not buy more hoping to hedge inflation.
CPI does not properly allocate spending into the silos in the proportions that people spend, therefore, CPI is already a flawed model.
33:10 there have been pockets of inflation in groceries. What a dated comment. Grocery prices are up over 15% year over year, what an understatement.
33:34 in you think grocery prices will be up 4 or 5%, that is not on the horizon. Gosh, I wonder if she wishes she could have that back.
33:50 many people are saving and not spending. True for 2020, when saving hit the highest point in June 2020, but since savings hit the lowest point in 4 years last month, and credit card debt hit the highest point in 4 years. Buy now, pay later is now a $200 billion dollar industry that rose from the ashes of the pandemic downturn.
36:20 - the Fed bought mortgage securities (conforming) thereby providing liquidity to the banking system, they didn't hand money to the banks and tell them to lend it out. They required reserves to be increased, and banks used the funds to shore up their balance sheets. Because those funds were never lent out, those funds did not create inflation. BIG DIFFERENCE!
37:30 asset price inflation? Are you serious? Most people realize grocery prices are not likely to go down, and asset price inflation becomes critical when you retire. The two are decoupled for 85% of the population.
Lastly, did you write this a year and a half ago, and decide to out this out now? All equity indexed are down from a year ago, yet inflation is the highest in 40 years. "Don't worry about the national debt". Yeah easy for you to say, but when only 27% of Americans pay any federal income taxes, you sure are comfortable putting all those eggs in 1 basket.

[jameswood]

Over the last five years, the market generated an average return above 19%. Even with 15% inflation, you come out with a 4% growth in real returns. On top of that, if you own properties, inflation pumps up your property value a lot which can make borrowing a lot cheaper.

[Absquatulate_Magnate]

This is the first time in a WHILE I've seen something this informative and not extreme partisanship on this news network. More of this = more returning viewers.

[chrisbluebird]

I’m confident the current market has an equal possibility of making high-value gains or losses, so I'm cautious with my selections; but, I heard that a trader made over $250k in this recession influenced market, and I could really need ideas on how to achieve similar profits.

[LearnToWin]

The true American Dream is keeping up with inflation, not other people’s lifestyle 💯💯💯

[JohnDoe-qzqi]

We are reliving the period of 1914-1932 with war, pandemic, inflation, market crash and possibly economic depression.