Federal Reserve Hikes Interest Rates up 0.5 Percent, Slowing Pace of Increases

The Federal Reserve on Wednesday announced an interest rate hike of 0.5 percent, easing up a bit after a series of much higher increases.

With inflation at a record high, the Fed has been scrambling to get interest rates high enough to discourage people from spending money, slowing the economy down in turn. The last four rate hikes have been 0.75 percent.

The risk is that growth will slow while prices and borrowing rates stay high, sending the economy into a recession. Fortunately, there have been some signs that inflation is finally starting to ease a bit. But Fed Chair Jerome Powell warned that while “it’s good to see progress … we have a long ways to go to get back to price stability.”

In a statement, the Fed pointed to supply chain issues and high food and energy prices due to Covid-19 and the war in Ukraine as main factors for inflation continuing to stay high.

But also, “recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low,” the statement said.

Dean Baker, senior economist at the Center for Economic Policy and Research, answered five questions about what this means going forward.

1. What does the 0.5 percent interest rate increase mean for consumers?

The interest rate hike means that rates for credit card debt, mortgages, and car loans will likely go up, Baker said—albeit less than after the Fed’s last policy meeting in November.

Over the past year, the rate hikes have also slowed down the housing market. However, Baker noted, “the number of construction workers has not fallen” due to a backlog in unfinished construction projects.

Jobs numbers have stayed high, which is positive for consumers but has caused concern for some experts that the economy has not slowed sufficiently to avoid a downturn.

Baker also warned that the higher interest rates push up the value of the dollar too, “which makes our goods less competitive internationally.”

2. What has changed in the past month that gives the Fed enough confidence to start slowing rate hikes?

But it’s not all bad news: “Inflation is clearly slowing in many areas,” Baker said. The October and November consumer price index, or CPI, a key government measure of inflation, indicate that inflation finally seems to be slowing a bit.

Baker attributes this to supply chain issues getting resolved. Costs for appliances and used cars, as well as shipping, have fallen.

3. Now that the Fed has been hammering away at inflation, what changes can people expect to start seeing?

The Fed indicated in its statement that it will continue to reevaluate the economic situation to determine what moves are necessary to get and keep inflation under control.

“The Committee anticipates that ongoing increases in the target range will be appropriate,” the statement said.

Powell told reporters that “it’s our judgment today that we’re not at a sufficiently restrictive policy stance yet, which is why we say that we would expect that ongoing hikes will be appropriate.”

But Baker said he hopes Powell “will indicate that he is prepared to adopt a wait and see attitude and hold off on further rate hikes.”

“This should mean further declines in mortgage and other interest rates,” he said.

4. Can a soft landing still be achieved?

The Fed has been clear its goal is to achieve a so-called soft landing, or a decrease in inflation without tipping the economy into a recession. And fortunately, the chances of a soft landing “look very good right now,” Baker said.

Inflation has slowed, but employment levels have remained high. It may take a while to reach the central bank’s target of 2 percent inflation, “but the direction of change is clearly downward,” according to Baker.

5. What are the current chances of a recession?

As the likelihood of a soft landing goes up, the likelihood of a recession goes down. In Baker’s opinion, the chances of a recession are “well under 50 percent at this point.”

The U.S. economy will probably take a hit from weaker markets abroad, as Europe struggles with direct effects from the Ukraine war and China battles a massive spike in Covid-19. But Baker is optimistic that won’t be sufficient to tip the U.S. into a recession.

“The biggest risks are from another wave of Covid or a big flare-up in the war in Ukraine,” the said.

This article has been updated.

People on the right seem unable to stop comparing Representative Ilhan Omar to white supremacists.

David Friedman, an adviser to Donald Trump’s 2016 presidential campaign who served under him as the U.S. ambassador to Israel, shared a tweet Tuesday that put the congresswoman on a level with Holocaust denier Nick Fuentes.

It is, of course, absolutely bananas to compare Omar and Fuentes. Since taking office in 2019, Omar—one of the first two Muslim women elected to Congress—has been repeatedly accused of antisemitism.

In early 2019, she said the U.S.-Israel relationship was “all about the Benjamins,” a reference to $100 bills. Omar was accused of propagating an antisemitic trope that Jewish people use money for influence. When she heard the criticism, she “unequivocally” apologized for her language.

But the claim that Omar is an antisemite has continued, often fueled by bad-faith attacks on her criticism of Israel. She was accused of saying Jews hold dual loyalty, for example, when she was actually accusing U.S. politicians of being overly pro-Israel.

Fuentes, on the other hand, actively promotes antisemitic views, such as denying the Holocaust and praising Hitler. A white Christian nationalist, he has said Jews are not part of Western civilization because they’re not Christian, and he has expressed support for a Catholic autocracy in the U.S. He has spread Covid-19 conspiracy theories and embraced homophobic and transphobic stances.

He is also apparently now close with Kanye West, who said he sympathizes with Nazis and likes Hitler.

Friedman’s comments came after Representative Kevin McCarthy doubled down on his promise to remove Omar from the House Foreign Affairs Committee should he be elected speaker of the House, again accusing her of antisemitism.

A coalition of liberal Jewish groups pushed back on him, saying his decision was “based on false accusations that she is antisemitic or anti-Israel.”

“We may not agree with some of Congresswoman Omar’s opinions, but we categorically reject the suggestion that any of her policy positions or statements merit disqualification from her role on the committee,” the groups said in an open letter published Monday.

“Leader McCarthy’s pledge seems especially exploitative in light of the rampant promotion of antisemitic tropes and conspiracy theories by him and his top deputies amid a surge in dangerous right-wing antisemitism.”

McCarthy has not explicitly condemned Trump for meeting with Fuentes last month, and actually defended the former president over it.

Omar has also hit out at McCarthy’s hypocrisy, saying on Twitter: “He does not care one bit about Jewish safety or any religious minority in our country.”

There have been at least 14 attacks on power stations across the country this year.

On December 3, two North Carolina power stations were struck with gunfire, leading to some 40,000 residents being without power, many of them for days.

Since mid-November, Oregon’s and western Washington’s electrical grids have been host to six attacks—some led by people with firearms—leaving customers experiencing brief outages in both states.

And in September, substations in Florida were targeted six times, with intruders forcing entry and tripping equipment that caused brief outages.

Federal agencies are becoming increasingly concerned amid the string of attacks. On December 2, the FBI co-issued a memo warning utilities about the attacks. North Carolina’s stations were attacked just a day later.

At the end of November, the Department of Homeland Security warned that “lone offenders and small groups” were continuing “to pose a persistent and lethal threat to the Homeland,” including on U.S. “critical infrastructure.”

In January, The Daily Beast obtained an earlier DHS intelligence report warning that extremist groups identified the “electric grid as a particularly attractive target given its interdependency with other infrastructure sectors.”

And earlier this month, CNN obtained a 14-page document circulating on Telegram that included a white supremacist instruction guide for how to conduct low-technology attacks that foment chaos, including attacking a power grid with firearms.

“When the lights don’t come back on … all hell will break lose [sic], making conditions desirable for our race to once again take back what is ours,” the document reads.

In February, three men pleaded guilty of plotting to attack substations with firearms; the trio were alleged white supremacists who had for years strategized how to incite civil unrest, a potential race war, and subsequently the second Great Depression.

The infrastructure connecting the nation is under increasingly high threat. And if enough light isn’t shined on what’s going on, we may soon lose that light, literally.

On Tuesday, Oregon Governor Kate Brown announced the state will be commuting the sentences of all 17 people on death row in the state, moving them instead to life in prison without the possibility of parole.

“I have long believed that justice is not advanced by taking a life, and the state should not be in the business of executing people—even if a terrible crime placed them in prison,” Brown said in a statement.

Brown’s action pushes forward with moratoriums first established by her Democratic predecessor, John Kitzhaber, in 2011.

“I also recognize the pain and uncertainty victims experience as they wait for decades while individuals sit on death row—especially in states with moratoriums on executions—without resolution. My hope is that this commutation will bring us a significant step closer to finality in these cases.”

Brown’s decision, made as she prepares to depart office after being term-limited, follows a growing opposition to the death penalty. Twenty-three states and Washington, D.C., have abolished the death penalty, while two others, California and Pennsylvania, have governor-issued moratoriums, as Oregon previously had. The death penalty is still legal in 27 states, including the states with moratoriums.

According to the Death Penalty Information Center, 17 people have been executed in 2022, all in Alabama, Arizona, Missouri, Oklahoma, and Texas, as of November 29. And as of April 1, over 2,400 people are on death row.

“The death penalty is immoral. It is an irreversible punishment that does not allow for correction; is wasteful of taxpayer dollars; does not make communities safer; and cannot be and never has been administered fairly and equitably,” Brown said.

LGBTQ activists and allies in San Antonio, Texas, turned a far-right attack on a drag show into an open-air party.

On Tuesday night, armed members of “This Is Texas Freedom Force,” which the FBI calls an “extremist militia group,” protested outside San Antonio’s Aztec Theatre as it hosted a drag show.

The protesters carried signs reading “Stop Groomers and Pedos,” while members of the San Antonio Family Association were also in attendance, waving signs reading “Marriage = Husband + Wife,” and “Honk for Marriage.”

But counterprotesters showed up in even bigger numbers on Tuesday, and according to Texas Observer reporter Steven Monacelli, they turned the night into a giant party.

A November report from GLAAD found that drag events faced at least 124 significant threats, just this year. Last week, another San Antonio venue, The Starlighter, canceled drag events for the rest of year due to safety threats and harassment.

Many of the far-right protesters on Tuesday came bearing arms, and so too did the counterprotesters, including a military veteran who sported a “FCK NZS” patch on his vest as he sought to support LGBTQ people.

In a basic sense, it’s obviously disheartening to see people take up arms against one other. No less while one side—whether by forced delusion from profiteering right-wing hacks or their own entrenched reactionary views—seeks to strip away fundamental civil rights from people.

On the other hand, the manner in which masses showed up to defend those whose rights are under attack is animating.

This kind of protest—one that presents a rejection of the restrictive and angry nature of reactionary conservatism—is profound. The counterprotesters, in their “open air party” allyship, showcased what can come from sharing compassion and love and radical empathy with people. That kind of joy can maintain a movement and can perhaps welcome others to join, even those who may have been seen as “too far gone.”