Inflation has slowed sharply, so why is the Federal Reserve still intent on killing jobs and economic growth?
Federal Reserve Board Chair Jerome H. Powell snatched the cookie jar out of the stock market’s hands on Dec. 14, when he followed up an announcement of a dovish half-point interest rate increase with a warning that the Fed didn’t think it had wrung enough inflation out of the economy and would keep raising rates
The number that makes it into news headlines, not least because it has been invariably cited by the Fed when it has announced its regular interest rate hikes, is an annualized rate based on the monthly changes in the trailing 12 months., and 6% for “core” inflation, which screens out the especially volatile categories of energy and food.
This is important because any mismatch between Fed policy and real-life economics imperils the welfare of tens of millions of Americans. As, Powell has been a firm believer in an immutable trade-off between inflation and unemployment in which reducing inflation requires raising unemployment and reducing unemployment produces higher inflation.
“An economic downturn like that is likely to have long-lasting adverse effects, and the most marginalized in society will,” says Nobel laureate Joseph E. Stiglitz of Columbia University and the Roosevelt Institute. Before taking a further look at Federal Reserve policy and its effect on ordinary Americans, let’s examine again what has driven prices higher over the last year.
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