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Economist Sees Trouble Ahead if Interest Rates Aren’t Cut Soon

May 28, 2024

I'm Coy Wells for U.S. Money Reserve. Last week, on Tuesday, May 14th, Federal Reserve Chair Jerome Powell said that the central bank will be patient on cutting interest rates, noting that inflation in 2024 has continued to run hotter than expected. Specifically, the Labor Department's producer price index rose 2.2% year over year in April 2024, the largest increase since April 2023.

Fox Business reports that another inflation gauge juiced by the Federal Reserve is running at 2.7%, well above the central bank's goal of 2%. But according to Moody's Analytics economist Mark Zandi, waiting to cut rates could spell trouble for the U.S. economy. Zandi argues that if rates aren't cut soon, it may lead to additional bank failures in the United States and even a recession.

Calling current interest rates corrosive, Zandi says that despite a relatively strong economy, higher borrowing costs are eroding credit conditions which could negatively affect banks. Others have also warned that the US may also see bank failures, including billionaire investor Barry Sternlicht, who warns that a looming commercial real estate crisis combined with high interest rates could lead to weekly bank failures.

So what can we do to help protect our hard earned savings? One asset many look to as a safe haven is physical gold. Gold has a proven history of a long term growth and is considered a hedge against market volatility and uncertainty. But gold also has shown growth during good economic times. In fact, gold's most recent all time high, which it reached in April 2024, came after predictions that interest rates would soon fall.

To learn more about what gold can do for your portfolio, call U.S. Money Reserve and speak to one of our account executives today.

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