Stocks are dropping now because companies and consumers face rising costs nearly everywhere they turn and investors fear that the Fed will clobber the economy as it tries to get inflation under control. The central bank has already raised interest rates twice this year, and Wall Street is bracing<\/a> for interest rates \u2014 which were close to zero in March \u2014 to rise as high as 3 percent by September. The last time the federal funds rate<\/a> was that high was during the Great Recession.<\/p>\n\n\n\n The tightening from higher policy rates filters through the economy to make borrowing of all kinds \u2014 from mortgages to business debt \u2014 more expensive. That slows down the housing market, keeps consumers from spending and discourages corporate expansion.<\/p>\n\n\n\n But interest rates are a blunt tool, and their impact on the economy is delayed, making it difficult for the Fed to know if it has gone too far before it is too late.<\/p>\n\n\n\n \u201cBy the time you start to catch it and realize you did too much, you\u2019re going to be deep in a trough,\u201d said Dan Genter, the chief executive of Genter Capital Management, an investment advisory firm. \u201cIt\u2019s going to take nine to 12 months before you see the total effects, and it takes that long to get out of it.\u201d<\/strong><\/p>\n\n\n\n Borrowing costs are rising as $5-a-gallon gasoline<\/a> and higher food costs, rents and home prices all begin to take a toll on households, Mr. Genter added. That in turn hurts consumer spending, which has long been a principal driver of the U.S. economy.<\/strong><\/p>\n\n\n\n \u201cMy fear is that basically the Fed is really going to tighten too much and potentially throw us into a serious recession,\u201d he said.<\/strong><\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" Quoted from THE NEW YORK TIMES: Stocks are dropping now because companies and consumers face rising costs nearly everywhere they turn and investors fear that the Fed will clobber the economy as it tries to get inflation under control. The central bank has already raised interest rates twice this year, and Wall Street is bracing for interest …<\/p>\nEnd Quote.<\/h3>\n\n\n\n
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