Powell and his colleagues on the Fed’s policymaking committee want to see signs that the abundance of available jobs - there’s currently an average of 1.7 openings for every unemployed American - will steadily decline. Kristalina Georgieva, managing director of the International Monetary Fund, warned Thursday that the IMF is downgrading its estimates for world economic growth by $4 trillion through 2026 and that “things are more likely to get worse before it gets better.’’ The global economy, weakened by food shortages and surging energy prices resulting from Russia’s war against Ukraine, may be on the brink of recession. And the Fed is trying to accomplish it at a perilous time. Some economists remain hopeful that despite the persistent inflation pressures, the Fed will still manage to achieve a so-called soft landing: Slowing growth enough to tame inflation, without going so far as to tip the economy into recession. In August, consumers spent a bit more than in July, a sign that the economy was holding up despite rising borrowing rates, violent swings in the stock market and inflated prices for food, rent and other essentials.įed Chair Jerome Powell has warned bluntly that the inflation fight will “bring some pain,” notably in the form of layoffs and higher unemployment.
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And for now, consumer spending – the primary driver of the U.S. In August, one key measure of year-over-year inflation, the consumer price index, amounted to 8.3%. It is aiming to slow economic growth enough to reduce annual price increases back toward its 2% target. In its epic battle to rein in inflation, the Fed has raised its benchmark interest rate five times this year. The public anxiety that has arisen over high prices and the prospect of a recession is also carrying political consequences as President Joe Biden’s Democratic Party struggles to maintain control of Congress in November’s midterm elections.
Slower job growth would mean less pressure on employers to raise pay and pass those costs on to their customers through price increases - a recipe for high inflation. September’s slightly more moderate pace of hiring may be welcomed by the Fed, which is trying to restrain the economy enough to tame the worst inflation in four decades without causing a recession. Friday’s government report showed that last month’s job growth was down from 315,000 in August and that the unemployment rate fell from 3.7% to 3.5%, matching a half-century low.
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