Plus 75 basis points to 1.75 percent – Fed President Jerome Powell pulled the monetary emergency brake on Wednesday by announcing that the US Federal Reserve was raising the key interest rate as much as it was about 30 years ago. Wrong diagnosis, wrong strategy, wrong analysis, ignorant procrastination, high inflation – he and the interest-determining body of the institution now obviously want to break this vicious circle as quickly as possible. With good reason, because the inflation rate is high. In May, at 8.6 percent, it was still significantly higher than generally expected and as high as it was 40 years ago. 

Expect more rate hikes

The latest projections show that all 18 celebrities attending the Fed meeting expect the institution to hike rates to at least 3 percent this year. The median forecast is for an increase of another 1.75 percentage points over the next four sessions this year. In March, they had judged the development to be significantly “milder”. Now they not only want to tighten the interest rate screw, they also want to reduce the money supply by significantly reducing the securities holdings on the central bank's balance sheet.

“The crucial question is where the key interest rate has to be in order to bring inflation to the desired target of 2 percent in the longer term, whether at 3.5 percent or 4 percent. We will probably find out empirically over time once the real interest rate on government bonds is positive across all maturities," said the Fed President.

Inflation has long been fueling doubts about the credibility of monetary policy, it is unsettling the economy, and it is driving voters crazy because it hits everyone when transferring rent, at the petrol pump or even at the supermarket checkout in their wallets. The governing Democrats fear that they will no longer be able to secure the political sinecure in the upcoming elections, despite their gigantic spending programs. With production costs rising significantly, companies are concerned about their profits, consumers are reeling from the dwindling purchasing power of wages, and investors fear that they will be expelled from the paradise of seemingly risk-free investments.