Will The FED RESET The Market? (What You Need To Know!) | Summary and Q&A

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July 4, 2022
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Minority Mindset
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Will The FED RESET The Market? (What You Need To Know!)

TL;DR

The Federal Reserve Bank's drastic rate hikes to combat inflation have pushed markets into a bear market, causing layoffs and struggles for companies. The Fed looks at CPI, PPI, PCE, and UE to determine their next move.

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Questions & Answers

Q: What impact do rising interest rates have on markets?

Rising interest rates lead to a bear market, as companies struggle to cope with higher borrowing costs, resulting in layoffs and financial difficulties.

Q: What factors does the Federal Reserve Bank consider to determine interest rate changes?

The Fed looks at CPI (consumer inflation), PPI (business inflation), PCE (core inflation), and UE (unemployment) to gauge inflation levels and the economic strength, which helps them decide on interest rate adjustments.

Q: Why are businesses experiencing more significant effects from inflation than consumers?

Inflation has caused the prices of raw materials to rise for businesses, squeezing their profit margins. Meanwhile, consumers feel the impact through higher costs of living, but businesses are being hit harder.

Q: How does unemployment play a role in the Fed's decision-making?

Low unemployment rates indicate a strong economy, increasing the likelihood of interest rate hikes. However, if unemployment starts to rise, the Fed may be less inclined to continue raising rates to avoid harming the economy further.

Summary & Key Takeaways

  • Rising interest rates have resulted in a bear market, causing layoffs and financial struggles for companies.

  • The Federal Reserve Bank relies on CPI, PPI, PCE, and UE to gauge inflation and the strength of the economy.

  • Inflation is at a four-decade high, with PPI even higher, indicating that businesses are being hit harder by inflation than consumers.

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