 0.25, 0.25% that is what the Federal Reserve raised the federal funding interest rate in this last meeting that I just announced last week. We shouldn't be too surprised. Inflation at the highest spend in 40 years came in at 7.9 according to the Consumer Price Index by the Bureau of Labor Statistics that was released a couple weeks ago. So inflation is at 7.9% and the Federal Reserve goal of inflation long-running is 2%. So Federal Reserve wants inflation to be at 2% a year and is at 7.9%. That means that what is the Federal Reserve going to do in order to stop inflation or to slow down inflation to get it down towards that goal of 2% you understand 7.9% versus 2%? It's a slight difference. Federal Reserve finally decided to raise the interest rates the first time in many, many years bringing the federal fund right now up to 0.25% base points for some of you may be saying. But what does that mean? What does that entail? That's what we're going to talk about today. Federal Reserve raised the interest rates to chase inflation and what does that mean for investors? But if you haven't done so already, please go ahead and make sure you hit that like subscribe, comment, share button and as always my name is Prince Dax. I'm the Prince of Investment and I know you guys and girls don't have a lot of time. I don't have a lot of time. So let's go ahead and jump straight into it. Federal Reserve decides to raise the federal fund rate by 0.25% the first time in many years, especially since we had the pandemic. When we experienced the pandemic back in 2020, the Federal Reserve, the chairman, Jerome Powell, you probably see his face, probably don't even know you see his face all the time. He decided to take the federal fund rate all the way down to 0 essentially, very near zero and when you push down the federal fund rate, this pushes up asset classes. We had a smooth recovery. We saw the stock market run up. We saw unemployment start to drop, meaning that we're going to a booming or a growing economy. The economy grows so much, grew so much that now we have a problem with inflation. So now only did we lower federal funds rates. We print up a bunch of money and we threw it out there and we called it PPP loan and we also called it the PPP loan and stimulus checks. Remember those stimulus checks a lot of Americans got thrown into their savings account. They give it to their kids, things like that. That's great. Everybody was happy, especially at a time when a lot of people lost their jobs and the economy was closed. They always say no good deed goes unpunished. So guess what? We already kind of knew that inflation will start to run away from us. Now inflation is at a 40 year high, a 7.9%. What does the Federal Reserve do? They decide to raise interest rates by 0.25% and we're looking to raise to buy six times a year. At the Federal Reserve keeps up on this rate. The Fed fund rate will be at 1.75, which is nothing compared to being at 4%. We were at a couple of years ago, but now today we're going to 1.75. But I can't say all of this if I didn't bring up the history of the early 80s. Seeing the early 80s, it kind of sounds similar to today. One key indicator that we don't have today that they had back in the 80s was unemployment. Unemployment in the early 80s, they had high inflation along with high unemployment. Put the economists in a very strange situation because if you raise interest rates, yes, you get to curve inflation, but then again, do you want to raise interest rates in a sluggish economy with high unemployment? The rise of interest rates led us into the recession. Now, granting, the Federal Reserve didn't act as swiftly as Jerome Powell did back in the early 80s. They raised the interest rates when all up to 20%, which was a self-induced recession that took us into a recession, but it did curve and slow down and stop inflation. Inflation was at double digits, which brings me to today. Do I think Federal Reserve, do I think interest rates are going to get to, not interest rates, but inflation is going to get to double points? Yes. I think by the end, by the summertime, we're going to be in double digit inflation, which shouldn't be a very big surprise because the last couple of months inflation has slowly been moving at 0.5%. Today we are at 7.9%, and I think the next CPI report that comes out next month for March is inflation is going to, we're going to easily stumble over 8%, then when we go into April, I think it's going to push us a little bit more. By April, May, June, June timeframe, we're probably going to be at 9% or 10%. Now one thing that I saw that was very intriguing. What will the Federal Reserve do with this balance sheet? What will it do? Remember when we had the, to stimulate the economy and we had the pandemic, two things Federal Reserve did, they lowered interest rates and they also started to purchase assets. When you purchase assets, anytime you buy something, just like we're experiencing in the housing market, why are the house prices going up? Because people are buying houses, there's a demand for housing, demand is exceeding supply, which is driving prices up. It's what the Federal Reserve did in order to stimulate the economy. They started buying assets or purchasing assets, aka pumping money into the market and they lowered interest rates. Now they're talking about, well now they are doing the same exact opposite at the end of last year. They started tapering, slowing down purchasing assets and they started to raise interest rates. In an attempt to slow down, in an attempt to slow down your, not your stocks, but to slow down the stock market itself and to slow down inflation. Now I became very interested, I did an episode and I talked about the other night, the Federal Reserve raising interest rates, is this going to do something, is this going to be deja vu of the 80s? Meaning in the 80s we saw the Federal Reserve chase inflation as they raised it and led to a self-induced recession. But a very good point that I am one of my mentors said today, they said, well you talk about the 80s inflation went all the way up to 20%. They don't believe 0.25 is going to do much to the economy. They don't believe 0.5 would do that much to the economy. So we don't believe that these small increment pieces of moving up the economy, moving in the interest rates up, that doesn't mean much, right? So we don't believe that it's going to touch the economy, stroke the economy or hurt the economy per se, right? When we have those things happen to the economy, please reassure yourself that the Federal Reserve is trying to hit the sweet spot. It's like, hey, let's raise interest rates enough to curve and slow down inflation. Once inflation tops out and starts to decline, then we're going to slowly keep interest rates right at that point or slowly start to decline them. When people say this, I think this is what they try to do in the early 80s, but we'll have to take a look at it. They believe that interest rates are way too low and the actual raise in the interest rates is a good thing for the economy. Now here's another tool to think about. Every time we saw the Federal Reserve start to raise interest rates, guess what happened? It was a sign of stocks doing well because the Federal Reserve would not raise interest rates in a time when stocks are not doing well or quote-unquote equities are not doing well. So right now we're seeing stocks kind of catch their breath a little bit for 2022. They started out very sluggish last week or so, last week or two. We are seeing oil have a great year and we're also seeing stocks taking a turnaround. A scary part about the 80s and today, Prince, why do you keep going to the 80s? The 80s was the last time we've seen double-digit inflation. It was the highest inflation was. Also on top of that, at that time, you had the Iranian embargo that happened in the early 80s and the early 80s, when they had that embargo of like, you know, Iran came out and said, you know what, we make all the oil. We're not going to send it to the United States. When they did this, they shot the price of oil because demand stays the same. If supply drops, what's going to happen to prices? What's going to go up? You look at what happened in Russia, Russia's the third largest producer of oil. According to the EIA, the Energy Information Association, they're the third producer of oil. What did President Biden announce over the last couple of weeks ever since the invasion of Ukraine? They announced numerous sanctions that, hey, we're not going to purchase oil from them. We're not going to purchase their products. And if we're not going to purchase oil from the world's third largest producer of oil, that itself curves down supply. Yes, we've been talking to Venezuela. Yes, we've been digging into our own reserve. But that starts to send oil prices up. But every politician you can see, every American out there is talking about how much gas is at the pump. Scary resemblance to the 80s, what happened with Iran in the late 70s, early 80s, and what's happening today with Russia and the US. The only big defining difference that I saw that was very different from the 80s and now is unemployment. Unemployment is not high like it was. You know, excuse me if I said this wrong, I think it was called stack flation. We have high unemployment and high inflation at the same time, which kind of ties the hands of the Federal Reserve. So right now, the Federal Reserve were on power on his latest meeting. He said, hey, I'm going to raise interest rates in an attempt to curve inflation, but I'm going to rate it a little. Watch the economy. Raise it a little. Taper our asset purchasing. What are we going to do, right? I'm very interested in what the Federal Reserve is going to do with the balance sheets. So very, very intriguing time right now. We've seen what the Federal Reserve is starting to do. We've seen that what does this mean for the economy? And usually when the interest rates are being raised, that's a great sign that stocks are doing well. But the downside is that technology stocks, anytime you raise interest rates, it starts to bring down asset classes. So low interest rates, very low interest rate society. I was able to get my house for 2.5%. I was able to afford more house. When you have low interest rates, it increases the demand for goods and services. But now with inflation starting to, not inflation, but with interest rates going back up, it will slow down the real estate market and the stock market. Now, does that mean it's going to slow it down to a reaching halt of a depression or recession? I'm not saying that. I don't think we're going to go that far. I know the Federal Reserve is kind of watching out to hit the sweet spot on that. But I definitely think that it will slow down the demand of houses. Houses have been going up 10, 15, 20% a year these last few years. And I think that it would get it closer to real estate price. Real estate current price is about 3%, right? Yeah, 3% is what real estate usually compounds that on annually. So I think we're going to get closer to that rate instead of 20%, 30%, 40%, 50%, right? So yes, now the Federal Reserve is raising interest rates. When they raise interest rates, it's going to bring down the demand for assets. Bring us down to more realistic points. Stocks have done very well over the last couple of years, and so forth. When we had that pandemic, we was in a 10, 11 year bull run. We had that pandemic. We had a huge correction put us into recession territory. But due to the swift actions of the Federal Reserve, by them deciding to pump billions of dollars into the market, what they call asset purchasing, and also lower interest rates all the way to zero, and provide stimulus packages to the general public. This in return stopped the inflation rates, not stopped inflation rate, stopped the economy from dropping even further. We had a smooth turnaround in 2020, actually put us into a positive year. 2021 was a positive year, 2022 was a positive year as well. But now 2020, the end of 2022, we're seeing the return of oil and we're seeing the quietness of crypto was going to happen to crypto. So anyway, ladies and gentlemen, that's what's going to, that's what's happening right now with the Federal Reserve. Federal Reserve decided to raise interest rates slowly and to curb inflation. And we're going to keep an eye on what happens to employment and also what happens to the inflation rates. Or is it going to slow down or are we going to go into a reverse way? Because right now we're at 7.9% and the Federal Reserve wants to get it down to 2%. So they're slowing down asset purchasing, taking money out of the market, and also making raising interest rates. We raise interest rates, it makes purchasing assets a little bit more difficult. Because my purchase, let's take my home for example, at 2.5%, great fits into my budget. At 4.5%, it's out of my budget. I wouldn't have purchased it. So it makes certain assets more affordable when you have low interest rates and it makes stocks go up. You see stocks go up. When you see stocks go up and jump, then guess what that's going to do? When you see stocks go up and jump, it's going to entice more people to want to invest. Anyway, ladies and gentlemen, that's my time for the show today. Hopefully you guys and girls got something out of that. We talked about the Federal Reserve raising interest rates for the first time in about five to 10 years, if I'm not mistaken. Raising interest rates and also to curb inflation, to slow down inflation, that's at 7.9%. And we're seeing those oil prices go back up. So I did a case study on this going back to the last time we've seen high interest rates. Very intriguing time, something to watch out. Hopefully you guys and girls got something out of it. Don't forget to hit that like, subscribe, comment, and share button. Don't forget that hey, whatever you do today will affect tomorrow. Make smart decisions. Until the next video, podcast, book, cartoon, or whatever else craze you see me do around the globe. Peace, be safe, I'm out and thank you.