Soaring inflation and its threat to the U.S. economy gave the Federal Reserve no choice but to raise interest rates this week and to signal further increases in the coming months, said William Christiansen, longtime chair of the finance department in Florida State University’s College of Business.
“There’s pretty much unanimous agreement that they have to raise rates,” said Christiansen, referring to the Fed’s rate-setting Federal Open Market Committee, or FOMC. “Rates are at historic lows, and they’ve been that low for a long time. Now inflation is very high, and the Fed has to respond.”
The Fed moved Wednesday to increase its federal funds rate – the rate at which banks borrow and lend to one another overnight – a quarter of a percentage point, from near zero to 0.25-0.5%.
It marked the first rate increase since 2018 from the central bank, and it came as inflation hit 7.9% – the highest in 40 years – for the 12 months ending in February.
“Inflation is always damaging to the economy,” said Christiansen, also the BB&T Associate Professor of Finance, director of the BB&T Center for Free Enterprise and the college’s MBA program director.
