As the Federal Reserve Bank gets ready for its next FOMC meeting in September, most bets are in for at least a half percent increase (50 bps) but more likely, a three-quarter percent increase. There are those who are saying to brace for an unexpected shock full 100 bps increase. A full percent increase in the Fed rate would crush the U.S. treasury, the most indebted in the world. According the USDebtClock.org, the federal debt stands at $30.8 trillion and counting. A one percent rate increase against such a monumental debt is mind boggling. Have you got an $300 billion lying around. I'm guessing I know now why the IRS is hiring some 80,000 new employees (with guns [but guns are bad for you!]).
Here's an interesting list of countries that have raised interest rates and when they went into effect this summer:
USA: 2.5% - up from 1.75% on July 28,2022 (.75% increase)
Australia: 1.85% - up from 1.35% on August 2, 2022 (.5% increase)
Chile: 9.75% - up from 9% on July 13, 2022 (.75% increase)
South Korea: 2.5% - up from 2.25% on August 25, 2022 (.25% increase)
Brazil: 13.75% - up from 13.25% on August 5, 2022 (.5% increase)
Great Britain: 1.75% - up from 1.25% on August 4, 2022 (.5% increase)
Canada: 2.5% - up from 1.5% on July 13, 2022 (1% increase)
European Union: 0.5% - up from 0% on July 21, 2022 (.5% increase)
Hungary: 10.75% - up from 9.75% on July 26, 2022 (1% increase)
India: 5.4% - up from 4.9% on August 5, 2022 (.5% increase)
Saudi Arabia: 3.00% - up from 2.25% on July 27, 2022 (.75% increase)
Mexico: 8.5% - up from 7.75% on August 11, 2022 (.75% increase)
Switzerland: negative 0.25% - up from negative 0.75% on June 16, 2022 ( a negative .5% increase)
That last one is silly I know but these ones should catch your eye...
China: 3.65% - down from 3.77% on August 22, 2022 ( 0.12% decrease)
Russia: 8% - down from 9.5% on July 22, 2022 (1.5% decrease)
Turkey: 13% - down from 14% on August 18, 2022 (1% decrease)
Here in Canada, we saw a full percentage point increase. Anyone with variable rate mortgages, helocs (home equity line of credit)and loans are now feeling the pinch as the August due date comes to pass.
As for the FED funds rate, what do you think? Will there be a rate hike in September? If so, do you think it'll be 50, 75 or 100 basis points? From what I'm seeing with the US dollar being weaponized against adversaries through sanctions, I'm expecting further punishment via a big rate hike. I'm guessing a minimum .75% increase and a very possible full percent hike. Red October anyone?
The majority of central banks except for a few, are lock in step with raising interest rates as suggested by the list above. A lot of people are finding themselves in a world of hurt as rising interest rates take a chunk out of their disposable income. Along with rising food prices, rent and energy costs, what could possibly go wrong???
Many businesses are struggling to get back on their feet after these ridiculous lockdowns that have achieved nothing, really. Now, they are faced with rising interest rates. Again, I say, 'what could possibly go wrong?'.
I suppose it's time to pay off that credit card and car loan, huh?
Check out some of my other posts...
Getting ready for the coming cold, cold winter.
Have we finally reached 'peak purchasing power'?
Dehydrating - A great way to store food for winter.
Update on my backyard ''Victory Garden'.
Getting ready for the coming food shortage.
The food shortage that doesn't have to happen!
Silver has risen 366% since year 2000.
Have we already reached peak gold?
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