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“But if tomorrow they stated on the headlines, ‘Okay, we are officially in a recession,’ nothing would be different tomorrow than it is today.”

With the most recent inflation numbers from June riding above 9%, the Federal Reserve on Wednesday raised the federal funds rate by 0.75% to help try to combat inflation. The big question is - what does this mean for the economy?

And while there are concerns abound about the potential for a recession – especially now with another fed funds rate increase – as Nate pointed out on a recent episode of Gimme Some Truth, even stamping the situation as a recession will not drastically change what’s presently happening. High inflation and struggles in the stocks and bonds markets have already been having an impact on the economy.

And we won’t know the full impact of the Fed’s most recent rate hike for quite some time. But the short-term result is likely going to be felt in the bond market. Bond values will fall as a result of the rate hike, furthering the YTD loss in the bond indexes. This will trickle through other aspects of the economy such as loan and bank depository rates.

Increasing the federal funds rate is the Fed’s most common way to curtail rising inflation; however, when to raise the fed funds rate and by how much become very difficult questions to answer. Economists and Wall Street traders alike will keep a close eye on a number of data points between now and when the Fed meets again in September to better understand the impact of this most recent rate increase.

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