Expert: Fed raising interest rates has 3 possible outcomes

Rush Hour

(NewsNation) — The Federal Reserve is expected to raise interest rates Wednesday. Economists predict the rate will go up by a substantial three-quarters of a point for a third consecutive time, pushing interest rates to the highest level in 14 years.

NewsNation business contributor Lydia Moynihan appeared on NewsNation’s “Rush Hour” on Monday to speak about possible outcomes. Moynihan says the economic saga we’ve been seeing play through the entire year may be coming to a climax this week.

“The kind of three story endings we’re looking at right now is the Federal Reserve keeps raising rates higher, so much higher that it pushes us into a recession, which just kind of has a cooling effect across the economy writ large. Businesses are less inclined to borrow things. That’s one scenario,” Moynihan said.

“Another scenario we’re looking at is that interest rate hikes aren’t enough to curb inflation. And that’s what we’ve been seeing the past few months play out. That means every time you go to the grocery store, it seems like you’re paying more money for a can of spaghetti sauce than you were just a couple months ago. That is the second scenario,” she added.

“Then the third, is this sort of Goldilocks scenario we are looking to have happen, where the Federal Reserve is able to thread the needle; they’re able to raise rates just enough to tamp down inflation without pushing us over the edge,” Moynihan explained.

So, what does this mean for Americans? While economists are hoping for the ideal third scenario that does not push the country into a recession, the cost of borrowing is expected to spike substantially in the short term.

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