by Jon N. Hall
In order to tamp down inflation, the Federal Reserve has started a program to raise its key interest rate target. On June 15, the Fed raised the federal funds rate target by 75 basis points, the biggest such rate hike since 1994. The Fed’s rate hikes have caused and will cause a rise in other interest rates. The rates for home mortgages have already risen. And for savers, commercial bank deposit rates are also inching up — it’s about time.
Inflation is the highest it’s been in 40 years. That takes us back to the early 1980s, the era of Fed chairman Paul Volcker. The official inflation rate of the ’80s topped out at 14.8% in March of 1980, whereas today’s rate is 8.6%. Inasmuch as the Fed under Volcker raised the federal funds rate to 20%, today’s Fed has a ways to go with its current 1.75% rate.