The Federal Reserve’s Open Markets Committee is set to meet this week. The upward trajectory of U.S. consumer credit is projected to have risen to $14.0 billion in April, up from $11.6B in March. As consumer credit expands, more dollars are put into circulation, which bids up prices for goods and services. The Fed has numerous ways it can control the money supply, one of which is setting interest rates. Raising interest rates makes borrowing money more expensive and attempts to reduce the money supply. The Consumer Price Index (CPI) is estimated to have already advanced 2.3% on the year, which is above the Fed’s long term target inflation rate of 2.0%. Most financial experts are expecting the Fed to raise interest rates at the conclusion of this week’s meeting. We expect interest rate sensitive investments, such as real estate, to perform poorly should the Fed continue to hike rates.
Source: Dow Jones News.