Federal Reserve Board Adds to Misery With New Interest Rate Hike
As expected, the Federal Reserve Board has again raised interest rates. But this makes no sense. The leading cause of most recent inflation has been caused by oil price increases which have rippled through the economy, boosting the price of all products. As the costs to produce all consumer goods increase as a result of oil at nearly $64 a barrel, and consumers on limited budgets have to consider whether to buy food or gasoline, or this winter, heating oil, will be hard pressed with possible interest rate hikes that may hit the credit cards they hold. And hard pressed families destroyed over huge health care bills for an unexpected illness are sharply limited to seeking bankruptcy protection, thanks to a bill lobbied for by the big credit card companies and banks, and passed by Congress and signed by Bush.
It is ironic that because oil has boosted prices, the Federal Reserve Board adds to the misery by boosting interest rates. This is a proof that instead of selective wage and price controls, boosting interest rates is a poor vehicle for inflation control. Once again the poor will be hard hit as this trend of rate hike, after rate hike takes place.
Many of the oil companies are international corporations, so controlling inflation with interest rates in the U.S. has little impact to control high oil prices that spur inflation. Interest rate hikes to control inflation is a very poor vehicle to curb inflation. It tends to victimize the poor far more than globalized corporations who operate without borders, and sometimes without conscience as well.