The Fed Raised Rates and I Say Good: Why Taking the Medicine Is the Right Call

Stop Whining About a Quarter Point

The talking heads were out in full force after the Fed’s latest move. Quarter-point raise, and you would have thought the world was ending. Too much pressure on the economy. Energy prices are already high. The markets have already priced this in, so why bother?

Here is why I bother. Because the alternative, soft-pedaling inflation and pretending everything is fine, is exactly how you end up in a deeper hole. I am a firm believer in taking your medicine, even when it tastes terrible.

Let me put some actual numbers in front of you:

• Mortgage rates are already sitting around 7.2%. A quarter-point fed funds move is not going to materially change that reality for existing homeowners.
• The 10-year and 30-year Treasury yields have already moved. The market did a lot of this work before the Fed even voted.
• Credit card rates may tick up another 25 basis points. If you are carrying a balance, that is a problem you need to address regardless of what the Fed does.

This is not a crisis. This is a correction that was necessary.

The Volcker Lesson Nobody Wants to Remember

I keep coming back to Paul Volcker because the lesson is critical and most people have either forgotten it or never learned it in the first place. When Ronald Reagan came into office in the early 1980s, Volcker engineered a recession. On purpose. To crush inflation. It was painful. It was ugly. And it worked.

That is what taking the medicine looks like. You do not get to inflation-proof your economy without some short-term pain. Anyone promising you a painless path through an inflationary cycle is selling you something.

Kevin Warsh was the lone holdout at the Fed on this vote, and he has been an inflation hawk for years. I find it interesting that certain politicians who attacked him during confirmation hearings, accusing him of being politically compromised, might want to reconsider that position right about now.

When Presidential Statements Make You Dumber

I have to address something that genuinely concerns me, not as a political statement but as a matter of basic economic literacy.

The argument that U.S. interest rates should be 1% or less because America is the best credit in the world is not a monetary policy framework. It is a bumper sticker. And the claim that a trade deficit is simply a “loss” reflects a fundamental misunderstanding of how trade actually works.

Here is the simple correction:

• A trade deficit does not mean America is losing money. It means Americans are buying more goods from a country than that country buys from us.
• Countries run trade surpluses with us in part because American consumers have purchasing power. That is a strength, not a weakness.
• Cutting off trade with every country we run a deficit with would not generate $1.5 trillion in savings. It would collapse supply chains, spike consumer prices, and trigger retaliatory measures against U.S. exports.

When economic policy gets driven by slogans rather than data, everyday Americans pay the price. That is the part that matters.

What You Should Actually Be Doing Right Now

Here is the practical takeaway from all of this noise:

• Do not panic about a quarter-point rate hike. It is not the story.
• Pay down high-interest debt aggressively. Credit card rates are already punishing and are not coming down anytime soon.
• Revisit your fixed income holdings. Higher rates for longer means your bond positioning matters more than it did two years ago.
• Ignore the political theater around the Fed. Monetary policy decisions made under political pressure historically end badly for investors.

The Fed is doing what it should be doing. The medicine is bitter. Take it.