I'm Coy Wells for U.S. Money Reserve. On June 15th, 2023, the Federal Reserve decided against raising interest rates, pausing for the first time since March of 2022. Leading up to this decision, the central bank had raised rates eleven consecutive times, making it the fastest tightening cycle since the early 1980s, when interest rates soared as the Federal Reserve attempted to fight off the inflation of the 1970s.
Though the tightening cycle has been momentarily halted, Federal Reserve Chairman Jerome Powell said during his testimony on June 21st of 2023 that the fight against inflation still had a long ways to go. Powell repeated this sentiment the following week, saying, “Although policy is restrictive, it may not be restrictive enough and it has not been restrictive for long enough to fight inflation.”
These comments suggest that the rate hikes from the Federal Reserve may soon continue. In fact, the Federal Reserve itself projected two more interest rate hikes before the end of the year in an official release with their June 15th decision. Of the 18 members of the Federal Reserve's Open Market Committee, which helps set central bank's monetary policy, nine support raising rates two more times this year.
The other committee members are split in their opinion, with suggestions ranging from zero new rate hikes to as many as four more interest rate hikes this year. Raising interest rates is a policy decision designed to help fight elevated inflation that significantly impacts American savings. A study by the TIAA Institute and George Washington University found that inflation has forced a quarter of Americans to cut back on their retirement savings and compelled another 12% of Americans to stop contributing to their retirement savings altogether.
More recent analysis of price through measures like the Consumer Price Index shows that inflation has improved, but is still well above the range desired by Federal Reserve officials. Fighting inflation with higher interest rates may also come with additional consequences. When the federal funds rate is high, the cost of borrowing increases and ultimately, the economy slows down. But while a slower economy can help with inflation, it may also harm businesses or even lead to a recession.
MarketWatch reports that corporate bankruptcies are currently rising as increased interest rates are making it more difficult for companies to pay off loans. How can consumers protect their portfolios against so-called sticky inflation and the potentially negative effects of Federal Reserve fiscal policy? One option might be to add a hedge to their portfolios in the form of physical precious metals like gold.
Gold exists outside of the traditional banking system and is independent from paper based assets like stocks, making it an ideal choice for many Americans looking to protect their portfolios from sudden shifts or drops in financial markets. Physical gold's long term growth potential helps it serve as an inflation hedge, which preserves your purchasing power even while the dollar declines.
To learn more about the benefits of owning physical gold and to receive your free gold information kit, call U.S. Money Reserve and speak to one of our dedicated account executives today.
