Fed prediction will hurt before it helps | News, Sports, Jobs
Armchair economists taking to social media with all the answers were likely shocked last week when US Federal Reserve Chairman Jerome Powell proclaimed that the Fed would raise its benchmark short-term interest rate. quickly enough and enough to curb growth and hiring, if it decides that is necessary to curb inflation.
Powell said policymakers at the National Association for Business Economics could achieve “restrictive” territory that would slow the economy and increase the unemployment rate, if that’s what it takes to “ensure a return to price stability.
“In particular, if we conclude that it is appropriate to act more aggressively by raising the federal funds rate by more than a quarter point at a meeting or meetings, we will do so,” said Powell.
For nearly two years now, the Fed has been lenient with the economy, prompting criticism that it is reacting too slowly to prices that are pushing inflation to 40-year highs. Their solution now might be painful, but Powell seems to think we can deal with it.
He pointed to a near-record level of open jobs, among other economic indicators, and suggested that higher Fed rates could dampen consumer spending enough to reduce this outsized demand for workers, which, in his view. turn, would reduce wage growth to a level that would not boost inflation.
“It’s an unbalanced labor market” said Powell. Good for workers, as it means higher wages for many, but also causes companies to raise prices to offset their higher labor costs.
“We need the labor market to be permanently tight” he said.
That’s not quite what you were looking for when you asked the wrong federal official to “do something” about higher prices, right?
Something has to give, and that’s how the federal government does it. As is almost always the case, those of us who live in struggling Appalachian communities are likely to suffer more from such actions than those in other parts of the country. But having our cake and eating it too is out of the question when it comes to saving.