that the Fed was prepared to be similarly aggressive, saying its rate hikes would cause “some pain” in the form of higher unemployment. The Fed, Powell said pointedly, would “keep at it,” a play on the title of Volcker’s autobiography, “Keeping At It.”
“The fact that we have the economy healing without unemployment moving up, without consumption slowing a lot — that suggests that really the driver of this was something else,” said Alan Detmeister, a former Fed economist now at UBS. It’s unclear how much longer this trend can continue to help slow inflation. Susan Collins, president of the Federal Reserve Bank of Boston, said Friday that the supply rebound has indeed eased inflation in goods. But the cost of most services, she said, “has yet to show the sustained improvement” that’s needed to bring inflation down to the Fed’s 2% target.
At the same time, businesses appear to need fewer workers. But instead of cutting jobs, they are seeking fewer new employees. The number of open jobs has sunk from more than 12 million last year to 8.8 million in July, though it’s still well above its pre-pandemic level. And fewer people are quitting jobs in search of higher pay elsewhere.
Americans as a whole saved a sizable chunk of the thousands of dollars of stimulus checks and enhanced unemployment benefits they received during the pandemic. Those savings helped propel consumer spending well into this year.
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