Jerome Powell, the current Federal Reserve Chairman, recently commented on the general rise in U.S. productivity/decrease in unemployment in 2018 that resulted in wage growth sans inflation. This relationship lends itself to the Fed’s current course of action in halting interest rate increases for the time being. Based on this information, Vice Chairman Richard Clarida also suggested that any current models in use that predict an inflation height should be discounted, and the Fed should wait until June to make any rate alterations. The article also details the ways in which labor force participation and increased opportunities are key to further improvement.
It’s interesting to hear that inflation remains below its expected level and that investors are predicting that the Fed’s next move will include a reduction in interest rates. The push to fill even more jobs and further increase wages is certainly an encouraging thought during this markedly uncertain time.
3 comments:
I think it is surprising that the Fed might consider reducing the interest rates considering that they are at some of the lowest levels they have ever been. Reducing the interest rates could also imply a strong dollar which could worsen our trade deficits as well. Despite this, wages increasing and growing job demands are certainly a promising outlook and can hopefully offset an impending recession.
What I saw in the most recent indicators was the reduced consumer confidence index and increased unemployment rate. There may be more internal problems that are not addressed properly and should be fixed. Economy seems to be in a slow cycle and issues such as accumulating national debts should be taken care of as well.
I am very surprised to hear the Fed might lower rates. I understand we have seen some weak economic data from the US and the rest of the world, which is why it makes sense to halt rate hikes for the time being. I think lowering rates now would not be what they want to do because they have stated many times they want a neutral interest rate and they are almost there, so raising them would put them back on their long term plan.
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