Besides raising the federal funds rate today by one-quarter point, to the range of 4.75-5.0%, the Federal Reserve Open Market Committee (FOMC) was the bearer of entirely bad news for the economy, resulting from the Fed’s own monetary policies.
This sentence from the statement released by the FOMC at 2:00 p.m. today basically sums it up: “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks.”
These “recent developments"—meaning bank failures and bailouts—are the result of the Federal Reserve’s own work as a kind of fear-inspiring “headless horseman” of Wall Street. Thus the translation of the statement quoted above: We bring you recession, and also more inflation.
