Smith: Biden’s Inflation Crisis Pushing Fed to Hike Interest Rates at Fastest Pace since 1981
Washington, D.C. – Today, House Budget Committee Republican Leader Jason Smith (MO-08) issued the following statement after the Federal Reserve raised the Federal Funds Rate by an additional 75 basis points, the third rate increase since March.“Despite being warned about the inflationary impact of their spending agenda, President Biden and Washington Democrats turned a blind eye to the pain they were about to unleash on the American people. They rammed through their $2 trillion partisan spending spree and sparked the highest spike in prices in forty years. Inflation is up 12.2 percent since Joe Biden became President. As a consequence, to combat the President’s inflation crisis, the Federal Reserve has now raised interest rates for a third time since March. Today's increase is the first time the Federal Reserve has raised interest rates by 75 basis points in a single rate hike since 1994 – almost thirty years ago. In the past three months, the Federal Funds Rate has gone up a combined 1.5 percent, the fastest cumulative rate hike in over forty years. The Federal Reserve is now on pace to raise rates faster this year, than the previous 15 years combined. When Joe Biden took office, the Congressional Budget Office predicted at the time that interest rates would not rise until 2024.
“These rate hikes pose a serious threat to the federal budget outlook and the American people. Farmers, families, and businesses will soon see a larger share of their federal tax dollars going just to pay interest on the national debt. As federal debt climbs, the federal government’s ability to respond to economic, public health, and international challenges will diminish. At the same time, increasing interest rates are having an immediate impact on Americans. The interest rate on a 30-year mortgage has now eclipsed 6 percent – having climbed 125 percent since Joe Biden took office. The American people cannot afford to keep paying for President Biden’s mistakes.”
Key Points:
- This week, the Federal Reserve raised interest rates by 75 basis points (0.75 percent), the third rate increase since March and the fastest cumulative rate hike in forty years, to curb rising inflation caused by reckless government deficit spending.
- The Federal Reserve has not raised interest rates by 75 basis points in a single increase since 1994.
- Inflation is currently at 8.6 percent year-over-year.
- Inflation has risen 12.2 percent since Joe Biden took office.
- In just the first five months of 2022 inflation has already grown 4.8 percent, surpassing the Congressional Budget Office’s projection for all of 2022 (4.7 percent).
- The last time inflation reached this level, interest rates were above 10 percent.
- In May, House Budget Committee Republican Leader Smith released a report on the impact of rising interest rates on the federal budget
- Should interest rates return to the 50-year average of 5.7 percent, federal public debt climbs to $215 trillion in 2051. Interest payments on the debt grow to $11 trillion per year by 2051
- Should interest rates return to 1982 levels of 10.8 percent, federal public debt climbs to $693 trillion in 2051. Interest payments on the debt would be projected to grow to $67 trillion per year by 2051
- Today, the interest rate on a 30-year mortgage is over 6 percent – up from 2.8 percent when President Biden entered office.
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