There’s nothing unusual about the Federal Reserve making a quarter-point increase in the target interest rate. Nor, historically, is there anything all that unusual about a 4% Federal funds rate: It’s been much higher than that in the past.
■ Inflation is higher than the 2% rate officially being used as a target -- again, a pretty ordinary target rate in the modern era -- and the only real tool the Federal Reserve has to slow the rate of inflation is to raise interest rates. If it costs more to borrow, people will (in the aggregate) tend to borrow less, and less borrowing tends to mean less demand for goods and services. For a simple and stark example, fewer people tend to buy new houses when mortgage rates hit 7% than when they’re down at 3.15%, and the houses that they’ll buy at the higher rate will tend to be smaller and cheaper than what sells when the rates are lower.
■ No amount of ranting and raving is going to change the basic reality: Many important costs (like fuel) are rising, the geopolitical environment is uncertain to the point it’s unsettling lots of people who understand how factors like trade influence the economy, and weird promises like $5,000 unsolicited payments drawn entirely from deficit spending only fan the flames of inflation.
■ The one thing about markets is that they can’t be bullied very much for very long before self-interest (expressed strictly in dollars and cents) takes over. Even when someone has tried to perfect the art of sly salesmanship, when there’s real money on the table, facts speak louder than words.