IT IS 2:00 IN NEW YORK.
11 A.M.
ON THE WEST COAST.
BREAKING NEWS.
ANY MOMENT WE EXPECT A
CRITICAL'S DECISION FROM THE
FEDERAL RESERVE.
THE AGENCY IS EXPECTED TO RAISE
INTEREST RATES FOR THE FOURTH
TIME THIS YEAR.
ECONOMISTS EXPECT A RATE HIKE
OF THREE QUARTERS OF A% TO HELP
DRIVE DOWN INFLATION.
WHAT EXACTLY HAPPENS WHEN THE
FED RAISES INTEREST RATES.
THE PRICE OF ANYTHING YOU PUT
INTEREST ON GOES UP.
WE ARE TALKING ABOUT CREDIT
CARD BILLS, NEW CAR LOANS, NEW
MORTGAGES AND STUDENT LOANS.
TENS OF MILLIONS OF AMERICANS
PAY THESE EVERY SINGLE DAY. LEADING OFF OUR CORRESPONDENT
LEADING OFF OUR CORRESPONDENT
IS TOM COSTELLO'S AND DIANA.
LET'S START WITH YOU. WHAT CAN WE EXPECT FROM THE
WHAT CAN WE EXPECT FROM THE
FEDERAL TODAY IN THE PRESSURE TO
CONTROL INFLATION.
>> IT'S IN PEERK THE FEDERAL
RESERVE RAISED INTEREST RATES
BY THREE QUARTERS OF A
PERCENTAGE POINT ON THE FEDERAL
FUNDS RATE.
THE RATE CHARGED BETWEEN BANKS.
WHAT DOES THAT MEAN?
THE FOURTH RATE HIKE THIS YEAR.
THEY ENGAGED IN THE MOST
AGGRESSIVE AND FASTEST SERIES
OF RATE HIKES WE HAVE SEEN
SINCE 1994.
UNDERSCORING THAT THIS
INFLATION THREAT TO THE ECONOMY
IS SIGNIFICANT RUNNING AT 9.1%.
THAT IS A 40 YEAR HIGH AS WE
HAVE SAID MANY TIMES.
THE FED IS ALSO SAYING THAT
WHILE MORE RATE HIKES ARE
LIKELY TO COME IN THE FUTURE
BECAUSE IT IS NOT GOING TO BE
AN OVERNIGHT THING WHERE YOU
BRING INFLATION DOWN QUICKLY,
THEY SUGGEST WE ARE SEEING A WAGE GAME.
WAGE GAME.
AND UNEMPLOYMENT REMAINS LOW, A
50 YEAR LOW AT 3.6%.
IT IS CONVOLUTED AND CONFUSING
FOR ECONOMISTS TO GET THEIR
HANDS AROUND.
IT'S UNUSUAL THAT WE WOULD BE
IN A SITUATION WHERE INFLATION
RUNS LIKE THIS, THERE IS
WIDESPREAD TALK WE COULD BE ON
THE VERGE OF A RECESSION.
ON THE OTHER HAND WE HAVE 50
YEAR LOW UNEMPLOYMENT LEVELS.
THAT IS AN UNUSUAL PREDICAMENT
FOR THE FEDERAL GOVERNMENT TO
BE IN.
NOW, HOW MUCH WILL THEY RAISE
RATES AT THEIR NEXT MEETING IN
SEPTEMBER.
THE THINKING FOR THE LAST MONTH
HAS BEEN THEY COULD GO BY
ANOTHER FULL PERCENTAGE POINT
IN SEPTEMBER IF THEY DON'T SEE
AND PLACING STARTING TO
MODERATE.
WE EXPECT A NEWS CONFERENCE.
DOES HE GIVE A SENSE AS TO
WHETHER THEY THINK INFLATION IS
COOLING DOWN? DO THEY THINK IT
IS HOT AND HEAVY?
ALL OF THAT WILL BE KEY AS WE
LISTEN THAT THIS NEWS
CONFERENCE IN THE NEXT 20
MINUTES.
>> BIG AND BREAKING.
I HEARD YOU SAY CONVOLUTED.
LET'S TALK ABOUT THE WORD
RECESSION.
IT'S DIFFICULT TO UNDERSTAND
FOR BREAK THIS DOWN.
>> AS I MENTIONED THE
UNEMPLOYMENT RATE IS
SIGNIFICANT LOW.
THERE IS DEBATE AMONG
ECONOMISTS AS TO WHETHER WE ARE
HEADED FOR RECESSION, ALREADY
THERE, THE STREET DEFINITION OF
RECESSION IS TWO QUARTERS OF
ECONOMIC INFRACTION.
IT'S SHRINKING.
THAT IS NOT THE TECHNICAL
DEFINITION BUT WHAT THE STREET
DEFINITION IS.
ARE WE THERE ALREADY?
AND LISTEN, IF WE ARE THERE AND THE ECONOMY IS SHRINKING AND
THE ECONOMY IS SHRINKING AND
YET YOU HAVE RECORD LOW
UNEMPLOYMENT, MAYBE THIS IS
RECESSION LIKE AND COULD GET
WORSE.
WE DON'T HAVE THE ANSWERS TO
THIS AND THE FED DOESN'T HAVE
THE ANSWER.
THIS IS THE NATION CENTRAL BANK
AND IT IS UP TO THEM TO TRY TO
GET INFLATION UNDER CONTROL.
THE POINT IS THIS IS THE
BIGGEST ECONOMY IN THE WORLD.
WE ARE NOT THE ONLY ECONOMY IN
THE WORLD.
UK, CANADA, EUROPE ALL HAVE
INFLATION. WHAT THIS ECONOMY
DOES, THE BIGGEST IN THE WORLD,
IT MATTERS AND IMPACTS
EVERYBODY.
>> ARE WE IN RECESSION WITH
INFLATION IT DOESN'T FEEL LIKE
IT. THE HARD NUMBERS ARE HOVERING
THE HARD NUMBERS ARE HOVERING
NEAR NINE%.
THEY WANTED AT TWO%.
THE RATE HIKES WE HAVE SEEN SO
FAR, WHAT ELSE CAN BE DONE TO
GET IT UNDER CONTROL?
IS THAT INEVITABLE?
>> THE TARGET FOR INFLATION IS
MORE LIKE THREE%.
IF YOU COME FROM NINE% AND
BRING IT BACK TO THREE%.
IT'S A BIG DROP.
DON'T GET ME WRONG.
THAT IS THEIR CHALLENGE RIGHT
NOW TO DO THAT.
THE QUESTION IS, ARE THE HIGHER
-- IS INFLATION COOLING THE
ECONOMY ON ITS OWN?
IT DOESN'T HAVE TO ONLY BE THE
FED RAISING RATES TO BRING
INFLATION DOWN.
IT COULD BE BECAUSE THE ECONOMY
IS COOLING.
GAS PRICES ARE COMING DOWN AND
TODAY WE SAW NEW HOME SALES
FALL BY 20% ALREADY.
MORTGAGE APPLICATIONS ARE
DROPPING.
ALL OF THAT WOULD SUGGEST THE
ECONOMY IS COOLING AND MAYBE
THEY DON'T NEED TO BE SO