Fed Hike, Consumers Tapped Out, & Credit Tightening — DiMartino Booth via the Julia LaRoche Show

The Federal Reserve’s recent 25-basis-point rate hike signals a commitment to further tightening, despite market expectations for a more dovish approach. Kevin Warsh’s communication strategy, which emphasizes core PCE inflation and a resilient labor market, clashes with empirical data showing rising long-term unemployment and a surge in bankruptcy filings. Current economic stability relies heavily on the top income tier’s consumption and an AI investment boom that appears to be peaking. As companies exploit accounting loopholes to inflate earnings, the underlying reality reveals a fragile economy struggling with high utility costs, stagnant real retail sales, and diminished purchasing power. With the labor market showing signs of structural scarring and consumer sentiment falling among high earners, the economy faces significant downside risks if the AI trade continues to ebb and interest rates remain elevated.