Though Wall Street indexes made something of a comeback Tuesday, recent days have been brutal for investors. The Dow fell more than 1,000 points Monday, following a smaller but still steep drop Friday. After hitting a record high on July 10, the tech-heavy Nasdaq has dropped 13% in less than a month. This extended drop is prompting increasing calls for the Federal Reserve to cut interest rates. And its critics have a point.
” This is both wrongheaded and counterproductive. In fact, the Fed’s actions also might well be inadvertently exacerbating how we perceive inflation. Credit card interest rates are hovering near record highs, and while they aren’t included in inflation statistics, they still drain the wallets of those with revolving debt. The same is true in real estate, where high interest rates both raise the cost of monthly mortgages and reduce the supply of new homes being built, increasing housing prices.