Fed Withdraws Stimulus Checks Before Christmas. How This Affects The Middle Class?

The federal government withdraws stimulus payments at the peak of inflation and unemployment, surprising Americans.

Millions of citizens had received stimulus benefits. Following the COVID-19 pandemic, the economy went into a slump which caused a series of hardships for the public.

Reports from the Indian Express indicate that Fed chief Jerome Powell stopped the stimulus payments to prevent a possible collapse of the economy. Federal government strategies do not appear to align with the Central Bank’s monetary policies, according to recent reports. Inflation levels have broken all previous records, which presents a tremendous challenge for the Central Bank.

The Public will Suffer at the Hands of Purchasing Power

It has been reported that retail places have increased by 6.2 % in October 2021, according to the Labour Department of the US. By making this move, the Federal government is likely to oppose the Central Bank’s monetary policy to curb inflation.

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A report in Indian Express states that the Federal government will increase bond purchases by 100%, going from $15 billion to $30 billion. Over the long term, the increase in bond purchases will increase interest rates, as well as reduce the purchasing power of businesses and consumers. In his announcement, the Fed chair emphasized that the policies no longer need to be implemented in order to support the economy.

Bond purchases by the US Central Bank have dropped by $30 billion since October. There were $120 billion in bond purchases in October; that is $15 billion per month. At the current rate of decrease, the assets will amount to $60 billion in January 2022 and a dead-end soon afterward.

Economic Growth Depends on Central banks

Like many other central banks around the world, the US Central Bank operates similarly. Inflation and unemployment rates are significantly affected by the Central Bank’s policies. As interest rates rise, everyone’s purchasing power will be reduced, leading to a downward spiral in the economy and GDP of the country.

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