USA-Inflation/Fed Rate Increase

Shotlist

FILE: Washington D.C., USA – May 12, 2020 (CCTV – No access Chinese mainland)
1. White House

FILE: Washington D.C., USA – May 4, 2022 (CCTV – No access Chinese mainland)
2. Various of U.S. Federal Reserve building

FILE: Shanghai, China – Date Unknown (CGTN – No access Chinese mainland)
3. Various of U.S. dollar banknotes going through cash counting machine

Ithaca, USA – July 27, 2022 (CCTV – No access Chinese mainland)
4. SOUNDBITE (English) Hassan Ilyas, former data scientist, Goldman Sachs Group:
“If the consumers now start to believe that this is not going to change. And in addition, you may have likely recession in the future, then you will see that consumers spending starting to decrease.”

Washington D.C., USA – Recent (CGTN – No access Chinese mainland)
5. Various of man withdrawing money from ATM
6. Pedestrians, traffic

Norfolk, USA – July 27, 2022 (CCTV – No access Chinese mainland)
7. SOUNDBITE (English) Bob M. Mcnab, Professor of Economics, Old Dominion University:
“We start seeing declines in single family housing values. American consumers will significantly retrench their spending in the coming months. The Federal Reserve is essentially caught between a rock and hard place. It needs to control inflation. It needs to increase the cost of money to lower consumer demand. And doing so it will slow the economy.”

FILE: Virginia, USA – May 19, 2022 (CCTV – No access Chinese mainland)
8. Various of customers, shopping trolley, grocery items in supermarket

FILE: Washington D.C., USA – Sept 29, 2020 (CCTV – No access Chinese mainland)
9. Various of people shopping in supermarket, goods on shelves

FILE: New York, USA – Oct 2021 (CGTN – No access Chinese mainland)
10. Various of pedestrians, diners
11. Pedestrians; restaurant along road

FILE: New York City, USA – Date Unknown (CGTN – No access Chinese mainland)
12. Various of street scenes, stores

FILE: Los Angeles, California, USA – May 18, 2022 (CGTN – No access Chinese mainland)
13. Various of people using gasoline pump at gas station, sign showing fuel prices

Storyline

The U.S. Federal Reserve on Wednesday raised its benchmark interest rate by 75 basis points, the second in a row with same magnitude, as elevated inflation showed no clear sign of abating.

The Federal Open Market Committee (FOMC), the Fed’s policy-making organ, decided to raise the target range for the federal funds rate to 2.25 to 2.5 percent.

The latest move came after the Fed raised its benchmark interest rate by 75 basis points at its June meeting, marking the sharpest rate hike since 1994. The Fed previously raised rates by 25 basis points in March and then by 50 basis points in May.

Headline consumer price index (CPI) has remained over 8 percent since March this year, a stark reminder that the Fed has a long way to go to bring elevated inflation under control. CPI in June surged 9.1 percent from a year ago, hitting a fresh four-decade high.

Fed Chair Jerome Powell admitted that the decision may take heavy toll on the labor market and drag down this year’s economic growth.

Analysts cautioned that sluggishness in consumer confidence will lead to declining consumption spending and pose risks to sustaining economic recession.

“If the consumers now start to believe that this is not going to change. And in addition, you may have likely recession in the future, then you will see that consumers spending starting to decrease,” said Hassan Ilyas, former data scientist at The Goldman Sachs Group.

With accelerating interest rates, Americans have to pay more to buy houses. According to the National Association of Realtors (NAR), the housing-affordability index fell to 102.5 in May, the lowest since July 2006.

“We start seeing declines in single family housing values. American consumers will significantly retrench their spending in the coming months. The Federal Reserve is essentially caught between a rock and hard place. It needs to control inflation. It needs to increase the cost of money to lower consumer demand. And doing so it will slow the economy,” said Bob M. Mcnab, Professor of Economics, Old Dominion University.