New Economic Reality Takes Hold as Federal Reserve Raises Interest Rate

The Federal Reserve raised its benchmark interest rate on Wednesday, but economists say this change is not solely due to the Fed's decision. Instead, it reflects a new economic reality where inflation remains stubbornly high and growth is accelerating.

According to Joe Brusuelas, chief economist at RSM, the shift from a low-inflation world to a higher-priced one can be attributed to the structural transformation of the economy. He notes that consumer and business spending are colliding with supply shocks and bottlenecks, contributing to higher oil and gas prices.

The AI buildout has struggled with insufficient supplies of computer chips, electronic equipment, and workers to put it all together. This shift returns the economy to a regime where inflation and interest rates are more volatile, much like before the 2007-2009 financial crisis.