Fed's Rate Hike Fails to Address Real Inflation Drivers

Federal Reserve Chairman Kevin Warsh has been criticized for his handling of inflation. On September 16, he increased the federal funds rate from 3.75% to 4.00%, a move that many believe is too little, too late.

This increase was disappointing and counterproductive, as it fails to address the real drivers of inflation: rising oil prices due to Middle Eastern chaos. The price of West Texas Intermediate crude has surged from $66.96 on February 27 to $107.02 on September 15, a 59.8% increase.

The Bureau of Labor Statistics attributes the gap between the 2.5% inflation rate for 'All items less energy' and the overall 3.4% inflation rate to the sharp rise in gasoline prices, which increased by 3.9% in August alone.

Robert W. Ring, a mortgage expert, notes that even a quarter-point hike can have significant consequences: on a $500,000 loan, it adds an extra $1,000 annually or $30,000 over 30 years.