Fed keeps rates the same because of rising inflation

On Wednesday the Federal Open Market Committee of the Federal Reserve released an unexpected announcement that US interest rates would remain in the same target range, between 3.50 and 3.75 percent, a move that reflects the high rate of inflation, 4.2 percent -  the highest rate since April of 2023. Add to that the recent May jobs report of 172,000 jobs, the die was cast for stasis.

"Inflation remains elevated relative to the Committee's 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy," the FOMC said.

Significantly, this was also the first report under the new Fed Chair, Kevin Warsh, who was nominated by President Trump as a direct move to cut interest rates, (which the former chair Jerome Powell refused to do using standard macroeconomic metrics), so Wednesday also brought a closer look at Warsh, who has changed both the tone of his post meeting remarks; and, has diluted the predictive “dot plot” which previously has shown possible future Fed actions: but that’s not all, Warsh also has created several task force committees that seem a generation away from his baby boomer predecessor.

Another significant change was that there was almost near unanimous support for the stasis, and even with some members diverging in how much of an increase, it reflects a recognition of the economic reality of the world’s largest economy, and its reaction to what, and how the Fed manages their dual mandate of full employment and inflation at 2 percent, a standard that Warsh seems to have drifted away from in his later remarks.

Of course, the elephant in the room is the Memorandum of Understanding between the US and Iran to end the war that has affected, or sustained the costs of energy prices. With that in mind, Monday’s news that Iran would open the Strait of Hormuz has eased the price of regular gasoline prices down by 50 cents per gallon, but still a dollar higher than it was before the war began in February. 

Trump was under a great deal of pressure to get the Strait open before energy prices rose even further, and to calm the stock markets, at least for the time being; with critics noting that Iran has a powerful tool in the future, should there be greater pressure from the US or Israel. But, for the time being it seems to be smooth sailing.

Setting sail in a new direction is Warsh, and CBS News reported that, “The so-called easing bias — a sentence in recent FOMC policy statements signaling the central bank was leaning toward cutting interest rates — was removed from the June guidance, which was significantly slimmer than the typical statement.” 

"You might have already noticed something, a difference in today's policy statement," Federal Reserve Chairman Kevin Warsh said in a press conference to discuss the Fed's latest interest rate decision. "It's a bit shorter, a bit simpler and it dispenses with some older language. That statement just gives you the facts as best we can judge it."

This will be a closely watched feature at future meetings and also under examination are “what economists expect to be a major shift in the Fed's communication practices, including the aforementioned circumspect policy statements and lesser forward guidance. 

That said, the new task forces are causing scrutiny to review how it handles or assesses “issues ranging from communications to inflation data,” but some analysts and economists are wondering what exactly those words will mean in the future and if there is a political message emanating from the White House.

It may be too early to tell, but with as with all current political events, and remarks, hinging on the November midterms for Republicans to keep their majority, we have this from Warsh: "If I saw somebody in the grocery store, what I would say to them is that we cannot have a very significant effect on particular prices, the price of oil in the markets today, or even the price of a dozen eggs," and Warsh continued."But it's to make sure that those changes in oil or beef or eggs or milk don't broaden in the economy, don't have second and third effects,” adding that, "We're going to deliver on it."

If Warsh is going to work with the White House, as expected, then that will be a tough slog with nearly 80 percent of Americans disapproving of Trump’s handling of the economy.

Returning to that statement, without uncertainty, or even affordability, the stated goals for these task forces are “addressing the Fed’s communications, its balance sheet, its reliance on data sources, productivity and jobs, and the central bank’s inflation “frameworks.” 

As anyone who follows Washington knows, the creation of white papers, task forces, and committees can be a place where legislation goes to die, so observers are wondering what will be the result of these goals.

Speculation is often the bulwark of Washington, and with the possibility of the evaporating “dot plots”, it runs rampant, so we have this from The New York Times:

“The dot plot had fewer entries than usual. Mr. Warsh confirmed he was the only official who did not submit any projections, while another policymaker opted against submitting projections just for 2028. Mr. Warsh has argued that Fed officials should speak less frequently and forgo providing specific guidance about where rates may be headed in the near term to avoid limiting their ability to pivot if the economic backdrop changes.”

An analysis of the possible meanings of this are wondering if this is a case of being quiet and carrying a big stick? Is the stick coming from the White House?

 

In one of his atypical comments the president did say, in contrast to an earlier Oval Office statement when the new inflation report was released, "I love it. The numbers were great. You know what I really love? I love the inflation," but when asked about the Fed’s decision to maintain interest rates, President Trump told reporters, “It’s alright, whatever.”

“Trump later expounded a bit more, when queried about the prospect of a rate hike soon. “It could happen. It’s hard to believe. It just keeps our country down. It’s so unusual.”

“But in a sign of a changed tone on the part of the president, he then said this of Warsh: “We have a very good guy over there now, so I’m guided by what he wants to do.”

The Times did expand on what an interpretation might be noting, “Rising inflation and a steady policy rate translate to a lower inflation-adjusted or “real” interest rate, meaning the Fed is not restraining the economy as much as it once was. That risks making the Fed’s inflation problem even worse, especially at a time when the labor market has strengthened and the economy more broadly is holding up well.”

With several factors looming on the horizon, ending a war, rising inflation, a resilient American jobs market and political maelstroms, plus a central bank possibly beholden to the executive, it’s a very long road ahead for price control, and even harder for working American families.

November Jobs Report is shaken, but not stirred

Continuing the slowdown for the American job market the Labor Department released November employment figures on Tuesday consistent with what we have seen for the last several months: the US took a loss of 106,000 jobs, and a gain of only 64,000 jobs with an unemployment figure of 4.6 percent the largest seen in four years; but, due to the government shutdown it does not contain the usual snapshot, and some economists see the figures as shaky with the lack of not only the snapshot, but also the data collection from the household survey, methods lacking the necessary detail due to shutdown delays.

Methodology is at the forefront of blow-back from the White House touting the success of the American economy and the increased proliferation of native born workers, an assertion consistent with the Trump administration's goals of immigrant removal both legal, and illegal.

CNN reported that “The White House on Tuesday touted the latest employment figures as a sign of a “strong, American First economy,” highlighting gains in the private sector:

“Since President (Donald) Trump took office, 100% of the job growth has come in the private sector and among native-born Americans — exactly where it should be,” White House press secretary Karoline Leavitt wrote Tuesday.” 

“Private-sector businesses have indeed driven job growth this year while public sector employment has declined – entirely because of steep federal workforce cuts by the Trump administration. From January through November, the US economy added 499,000 jobs: The private sector added 687,000 jobs and the government (federal, state and local) shed 188,000 jobs.”

With the midterm elections upcoming in a matter of months the administration is determined to show that there are job gains for the US, but as CNN added, “However, the pace of job growth has fallen off: The year-to-date employment gains – overall and private-sector – are the weakest since 2020 and, before that, the Great Recession.

Additionally, it’s impossible to attribute the monthly employment gains reported widely from the jobs report to any particular nativity or documentation status – labor force and demographic statistics are drawn from an entirely different survey than the monthly payroll numbers."

While some economists and observers see this as a shell game by the White House, it’s a sure bet with high stakes at maintaining a lead in the US House of Representatives they will want to put a best foot forward on what is a slowly leaking jobs market.

While the DOGE decimation of federal payrolls gave a strong hit to the report, combined with more workers holding part-time jobs because they could not find full-time work increased to 8.7%, its highest since August 2021, a concerning fact.

According to CNBC, “The October slump came from a steep fall in government employment as deferred layoffs instituted earlier this year took effect. Government payrolls were off 162,000 for the month, and fell an additional 6,000 in November."

Once again, the heavy hitters were health care, adding 46,000 jobs, with more than 70% of the total net increase, and construction added 28,000, while the umbrella label of social assistance showed 18,000.

It was also reported, “On the down side, transportation and warehousing was off 18,000, part of a continuing trend in job losses for the sector. Leisure and hospitality also posted a loss of 12,000.”

A significant reason for the steady and reliable hiring increases in health care are America’s aging population, and their reliable needs.

While hiring has slowed and in some cases been eliminated, the Trump White House paints a glowing picture: “The strong jobs report shows how President Trump is fixing the damage caused by Joe Biden and creating a strong, America First economy in record time,” Leavitt said in a statement adding that “Workers’ wages are rising, prices are falling, trillions of dollars in investments are pouring into our country, and the American economy is primed to boom in 2026.”

The Federal Reserve in creating a rate cut had a difficult path to follow and

the dilemma that Powell has faced, as we have noted many times before, is the balancing act between meeting the mandate of full employment with 2 percent inflation.

Inflation has rebounded from earlier years when it was over 3 percent, especially in the post pandemic world, the current rate is still high; and, is especially felt by low income Americans during their weekly grocery shopping;with many feeling that the president has not kept his campaign promise of lowering those prices, inasmuch as any president can.

“The Fed is unlikely to put much weight on today’s report given data disruptions,” said Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management. To CNBC, noting that,“The report on December’s employment data, released in early January ahead of the next meeting, will likely be a much more meaningful indicator for the Fed when it comes to deciding the near-term policy trajectory.”

Thursday offered a glimmer of hope with the CPI report that strips out volatile food and energy costs, and according to Yahoo Finance,“Inflation pressures eased more than expected in November, according to the latest data on consumer prices published by the Bureau of Labor Statistics.”

The Consumer Price Index (CPI) rose 2.7% over the prior year in November, less than the 3.1% increase that had been expected by economists, according to Bloomberg estimates.”

However, there is a cautionary note, “This looks like positive news overall, but the lack of detail and the absence of data collection during the shutdown introduce a degree of skepticism that’s hard to ignore," wrote Olu Sonola, head of US economic research at Fitch Ratings, in an email after the report,” but added that “Tariff pass through remains muted, even as companies stocked up on holiday imports facing higher duties. The Fed will welcome that trend, given its recent focus on cutting rates to support a softer labor market."

In his Wednesday night address to the nation, the president said, “Very importantly, there are more people working today than at any time in American history. And 100 percent of all jobs created since I took office have been in the private sector. Think of that, 100 percent of all jobs have been in the private sector rather than government, which is the only way to make a country powerful and great."

As was expected he trashed former President Biden and his handling of the economy, immigration and that the rest of the world laughed at us, and while we will leave the majority of fact checking to others, to say that Trump was on a stretch would not be an exaggeration.

“Already, I’ve secured a record-breaking $18 trillion of investment into the United States, which means jobs, wage increases, growth, factory openings and far greater national security. Much of this success has been accomplished by tariffs, my favorite word, tariffs, which for many decades have been used successfully by other countries against us, but not anymore.”

Tariffs have been the core of uncertainty by the nation’s employers and while the full effect may not be seen until January, this current fear can be seen in the November jobs report.

Taking a closer look,”Average hourly earnings rose just 0.1% for the month, below the estimate for 0.3%, and were up 3.5% from a year ago, the smallest annual gain since May 2021,” and "The 0.1 percentage point increase in the unemployment rate was largely a function of labor force growth.”

“The strong jobs report shows how President Trump is fixing the damage caused by Joe Biden and creating a strong, America First economy in record time,” Leavitt said in a statement, stating that, “Workers’ wages are rising, prices are falling, trillions of dollars in investments are pouring into our country, and the American economy is primed to boom in 2026.”

Steady consumer spending has been seen by high income earners, and while inflation has rebounded from earlier years when it was over 3 percent, especially in a post pandemic world, the current rate is still high, and is especially felt by low income Americans during their weekly grocery shopping; and, many are feeling that the president has not kept his campaign promise of lowering those prices, inasmuch as any president can.

A recent PBS/NPR/Marist poll showed Trump taking a direct hit by Americans who feel that he has failed them, with 55 percent of those polled disapproving of the way he is handling the economy.

December rate cut: A holiday gift from the Federal Reserve

Wednesday's rate cut by the Federal Reserve had been anticipated by some in our earlier coverage, but seeing is believing, and that news came with no data from the Bureau of Labor and Statistics due to the government shutdown, so the Federal Opens Market Committee made the decision with one armed tied behind their collective backs.

Consequently they also faced the dilemma of trying to meet its mandate of full employment and inflation at the rate of 2 percent creating division among its members, with some saying hold back on a cut, and full steam ahead by others, creating a first for that body.

The drop in the rate went down to a range: 3.5 to 3.75, to 0.25 percentage points. And The Hill reported that, “The FOMC approved the rate cut by a vote of 9 to 3, a smaller margin than the typical Fed rate decision. Fed board member Stephen Miran preferred to cut rates by 0.5 percentage points, while Federal Reserve Bank of Chicago President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid called for no cut at all.”

It should be no surprise that Miran, an ally of President Trump, wanted the larger cuts a bone of contention between the president and Federal Reserve head Jerome Powell.

Even allowing for a plurality of views, “The unusual number and nature of Wednesday’s dissents revealed how hard it could be for Fed Chair Jerome Powell — and his eventual successor — to keep the FOMC united with the economy at a foggy crossroads” reported The Hill and added,”The last time three FOMC members voted against a Fed move was in September 2019, when the Fed cut interest rates to unwind a series of previous increases meant to stave off inflation that never materialized."

At Wednesday’s press conference, Powell said,“Everyone agrees that inflation is too high, and we want it to come down, and agree that the labor market has softened and that there’s further risk. Everyone agrees on that.” 

Other reports from officials say that inflation might be acceptable at 3 percent as a new standard, yet that shift might be more philosophical than reflection of a true policy, beyond the traditional mandate of the Federal Reserve.

With perhaps the greatest understatement he added: “Where the difference is, is how do you weigh those risks? And what does your forecast look like?”

Powell’s term ends in May of 2026, and Trump is expected to name his successor in the near future; and, it’s no secret that the two have differed on the role and size of rate cuts, and the president did give some of his characteristic verbal bludgeoning to the Chair for the past several months.

The dilemma that Powell has faced, as we have noted many times before, is the balancing act between meeting the mandate and taking stock of inflation, plus the adjoining employment rate. While inflation has rebounded from earlier years when it was over 3 percent, especially in a post pandemic world, the current rate is still high, and is especially felt by low income Americans during their weekly grocery shopping; and, many are feeling that the president has not kept his campaign promise of lowering those prices, inasmuch as any president can.

Meanwhile employment has remained resilient, if shaky, in the face of economic uncertainty, mostly attributable to the billions of dollars in tariffs imposed by the president, what an earlier era called protectionism; and, the effect on hiring is significant as employers are trying to make do with what they have on payroll, and increasing hiring only when necessary, creating a slowdown in many areas, health care and hospitality excepted.

Consumer confidence has taken a hit, as are the poll ratings for the president now at 36 percent. And, while he has portrayed affordability as a Democratic hoax, the reality of higher prices and the ever increasing costs of housing have many American working families deeply worried about their economic future, not to mention meeting monthly bills, and feeding their children.

There is some optimism by some economists that consumer spending is steady but it;s important to note, as we did last month, that the increased spending is supported by high income earners, but lower income individuals and families face the above challenges, thus the infamous K shaped economy.

Currently it is estimated that there is $150 billion in tariff money sitting in reserve and the the president has said that some might be given to Americans in the form of a check, or to help pay for health care, but economists don’t see that as a viable option in either case, with the latter forcing people to confront, on their own, the behemoth of American health care giants.

The role of politics cannot be underestimated in examining the American economy but there are fears that many hardworking Americans may be caught in the middle.

On Thursday there were the initial jobless claims and while there was an increase to the tune of 236,000 and allowing for some holiday volatility, following previously lower numbers of 191,000, there are cautionary notes, according to Claudia Sahm, a former Fed economist, who told Fortune magazine that, “Initial claims don’t give you a sense of what’s coming,” she said. They’re what economists like to call a lagging indicator, meaning they tend to spike after a recession is underway, not before it. Recent weekly readings, distorted by holidays and special factors, are even less informative.”

Nevertheless, as Yahoo Finance reported, “Weekly initial claims tend to be choppy around the holidays and will likely continue to fluctuate through the end of the year, but Thursday’s figures are toward the higher end of readings seen in 2025. Companies like PepsiCo Inc. and HP Inc. have laid out plans to reduce headcount in recent weeks, and nationwide layoffs in October were the highest since early 2023.”

The future is on the minds of many and Powell, playing close to the vest, feels at best that shifting into neutral gear may be the best option but then again, as The New York Times opined, ”If there are signs that the unemployment rate might surge, that would probably prompt more officials to embrace the need to cut rates. So far, though, most policymakers do not appear worried, nor do they appear to be downbeat about growth. Projections released on Wednesday showed that most officials expected the unemployment rate to peak at 4.5 percent in 2025, before declining.”

Tariffs are still on the chart and it seems that Powell, and others, are waiting for the first quarter of 2026 to make an assessment, perhaps a code word for “wait and see.”

Updated on December 15, 2025

.

July Jobs report is a cause for champagne in the US

If the June Jobs report was the occasion for an extra chocolate eclair on the breakfast plates of economists, then July with its whopping 528,000 non-farm payroll jobs, is now an occasion for champagne cocktails, after the US Labor Department issued the good news on Friday.

This news also brings the country to a milestone: each and every job that has been gained this year recoups the losses from the Covid pandemic, not an insubstantial feat, for a country that was brought to its knees with the pandemic wreaking havoc on the economic health of the world's largest economy.

The unemployment rate, what we call the marquee rate, descended to 3.5, from last month’s 3.6. There was a conundrum, of sorts, with a flattening of the labor force participation rate that has caused concern for some economists and observers, not to mention employers, looking to hire.

While, for some, it may be more of a backstory, it’s still a significant outlier for those whose job it is to study the economy, or at least follow a trajectory, and one of them is the Federal Reserve Board, whose twinned mission of keeping inflation at 2 percent levels, and the nation at full employment, has watched this report with some concern, especially with the overall increase in wages from 4.9 percent to 5.2 percent and with the series of scheduled rate increases, the last of which was 0.75, the highest in decades; but, now comes concern that these employment gains coupled with higher wages, needs a cooling down to avoid higher inflation, and we will have to wait till September to see what the Fed will do.

Of course, the R word has been bandied about so much in the general media, that many want to see the word banished from the vocabulary of news programs as the continued lead stories on radio, television and the internet, is “Folk’s we’re headed into a recession.”

For those that stayed awake in Econ 101, it’s easy to see that this is pure fallacy: 376,00 jobs for June and 528,000 for July, it’s better to state, “Ain’t no way!”

This strong labor market is one that Chair Jerome Powell has also cited as a reason to say that the US is not in a recession.

Jerome Powell

The agreed upon wisdom is that there must be two quarters of retraction in the GDP which we have had, but absent rising unemployment, and other facts, we are not. Those other factors are: “falling retail sales, and contracting measures of income and manufacturing for an extended period of time.”

Of course, despite the high wages, prices are well, high, as anyone who pumps gas at the station knows, wages are not keeping up with inflation. For example, a local fast food supervisor told us that he can’t even get a full tank on his kid-friendly SUV, without shelling out $100.00.

Some drivers are feeling a sigh of relief at an average price of $4.79 a gallon as welcome news.

There are concerns present with the household survey standing at a nearly unchanged labor force participation rate of 62.1, even but that alignment, even with the upward revisions for May, and June, shows that the American economy is much more robust, and resilient, than many would have thought.

“As long as you’re above 200,000, you’re still doing better than pre-pandemic and it’s still strong, “said Diane Swonk, chief economist at KPMG. “It doesn’t feel very good, because it’s being accompanied by inflation,” reported CNBC.com

From all reports it seems that the Biden Administration's efforts with a slimmed down version of the “Build Back Better Act” is destined to become law after weeks of negotiation with Sen. Joe Manchin of West Virginia and also the support of Arizona Sen. Krysten Sinema, both bulwarks against the previous bill.

With its increase in increased tax rates for high income earners, the estate tax, and a much championed push for a tax on billionaires, and while broader tax increase are missing that were much desired such as, capital gains, to 25 percent, and a restoration of the “the top income tax rate of 39.6 percent, among others, the legislation is expected to bring down inflation with efforts by the Federal Reserve.

Tax experts and economists expect that the reduction will be felt over years, and not months, and one source, according to Vox.com “Shai Akabas, director of economic policy at the Bipartisan Policy Center: I think it’s likely to have a modest downward effect on inflation, so directionally, I think it is likely to push downward on prices. But that’s unlikely to be the primary effect of the legislation, given how many specific policies there are.

Most of the impact on inflation and the broader economy from this legislation is likely to be medium-term, not felt in the immediate next few months, which is how households are thinking about inflation.”

He also added an important note: “That’s largely because there’s very little that policymakers can do, certainly on a legislative basis, to impact inflation overnight. That is primarily the job of the Federal Reserve. … There’s not much you can do, absent overnight taking lots of money out of the economy, out of people’s pockets — which is not something that Congress likes to do or almost ever does — that is going to dramatically change the immediate inflation outlook.”

The push to bring down inflation is needed, as Swonk noted, when she said, “At the moment, inflation is hurting everyone. It’s an equal opportunity scourge at this point,” and Michael Gapen, chief U.S. economist at Bank of America, added “What policymakers are faced with is pushing the unemployment rate higher.”

That would also affect unemployment especially on the lower rungs of service and retail jobs, especially in two income families where female employment is mostly seen.

Gapen also feels that by the end of the year, “job growth could turn negative, followed by the possibility of several monthly reports of job losses as high as 150,000. He expects a shallow recession to take hold by then,” they added.

Right behind him is Swonk who “said she also sees payrolls turning negative, with monthly job losses between 100,000 and 200,000.”

While the service sectors such as leisure and hospitality have seen the greatest growth, 96,000 along with that catch all category of business services have expanded to 89,000, these numbers represent an expansion of a much needed workforce, with some previous barriers such as marijuana convictions, and the lack of a college degree deleted.

Diane Swonk

As Gapen and Swonk indicate these growth areas could be those cut by year end. But, this has also seen cuts on the corporate side when Walmart has targeted 200 corporate jobs for layoff, as noted in a New York Times report, quoting their announcement that “American consumers were pulling back on purchases of general merchandise to focus on necessities like groceries. The company said it expected operating profits for the full year to fall by as much as 13 percent, as the company was forced to continue marking down inventory that wasn’t selling.”

CNBC also quoted Wells Fargo Institute who expect that by the end of this year, “unemployment will tick up to  4.3% . . .”

President Biden has acknowledged that job growth will slow by the end of the year, and that despite contractions does not mean the economy is tanked.

Speaking of tanks, when Biden made his first trip to the Middle East and met with Gulf Leaders of Saudi Arabia it was hoped that he could bring down the price of gasoline that has forced millions of drivers in the US, and the UK, to cut back, often, on needed trips.

Unfortunately, these leaders were less than willing to budge much, and production has increased to less than one-tenth of one percent, or 100 barrels per day, an almost negligible amount that will surely not only show little effect on the needs of consumers, and will be cause of concern in the West Wing as Biden faces increased GOP criticism, as he heads to the November midterms.

While that maybe a worry for the president, American consumers have their own worries and fears about budgets, food on the table and educating their children all of which needs to be met, just as inflation nibbles away at the edges.

Fed Chair Powell on the hot seat as inflation swells in US

It’s certainly not a secret that in the United States inflation is at a forty year high and that from Main Street to Wall Street there are fears and concerns about the increased cost of gasoline, groceries, and nearly everything else. Chicago has seen gas at $6.00 a gallon not far from Los Angeles, and filling the tank, for some vehicles can get to three figures.

The dollar stores are seeing huge influxes of shoppers eager to avoid the high prices at the local chain supermarket, and people are eager to spend less to make sure that meat and eggs can reach the breakfast table. 

In Washington the White House has said that the Federal Reserve with its twinned mandate of keeping inflation at 2 percent, and full employment, has the lead, but it has struggled to gain a foothold on the problem, and last week they raised the interest rates to three quarters of a point, the highest hike in 28 years.

At the September meeting there was another similar rate increase at the same 75-basis points and it seems that rate increase are here to stay until inflation is conquered, with some opining that this will continue at least into 2024, with predictions for 2023 from 4.24 percent to 5 percent.

Fed Chair Jerome Powell, backed into the corner by the Biden administration, was forced to admit that as CNN reported there are external factors that will make it harder to turn the corner, from that “soft landing” that we reported on earlier, and that mitigating forces such as the war in Ukraine, supply chain woes, caused by the coronavirus, were still taking its toll on the US economy.

He is supported by Mark Zandi, chief economist at Moody's Analytics, who has said,  "The primary culprit [of inflation] was higher energy prices, particularly gasoline, and a lot of that can be traced back to Russia's invasion of Ukraine that caused global oil prices to spike," he said in a recent episode of his podcast, Moody's Talks. Inflation should ease, when the pandemic subsides and the market adjusts to new sanctions against Russia.”

While gasoline prices have decrease with an average nationwide tag of $4.50 dollars, rents and food remain sky high.

"So much of it is really not down to monetary policy," said Powell at a press conference last week that those supply chain problems had lasted longer than he anticipated

.

In a recent mandated appearance before the Senate Banking Committee, he added, notably, and perhaps defensively, “We’re not trying to provoke, and don’t think that we will need to provoke, a recession,”  he stressed, “But we do think it’s absolutely essential that we restore price stability, really for the benefit of the labor market, as much as anything else.”

Writing in The Guardian, Clara Mattei, an economics professor at The New School for Social Research, opined that shared pain of rising interest rates will hurt a lot pf people, and to that affect there is truth, if restrictions, such as last week’s surge in interest rates cuts cools down the economy, it will also cause many workers a job loss especially on the lower end, where their jobs will be low hanging fruit, to be quickly cut.

Sen. Elizabeth Warren told Powell at a recent congressional hearing, “Rate increases make it more likely that companies will fire people and slash hours to shrink wage costs,” 

“The cost of borrowing will also increase government expenses for public works and social services, forcing states to further cut their budget, hurting the most precarious parts of society that rely most on these services,”  Mattei stressed, and some other economists have said that intervention measures like more food stamp benefits might help mitigate some of these fallouts.

Mattei added a final warning saying that while, “Higher inflation is eating away at wage increases, but this does not mean lower costs for employers: compensation for private industry workers increased 4.8% over the year. By comparison, in March 2021, employers faced an increase of only 2.8%.”

Powell himself has acknowledged that these compensatory measures such as “lowering incentives for businesses to invest will produce unemployment,” and we see the risk involves planning to determine the correct balance to stem much of the expected  blood letting.

If it seems that the chair is being backed into a corner, his answers seem to make that even clearer. But, there are others that want to look to the future, and take a look down the tunnel for a possible gearing towards a recession.

Federal Reserve Bank President Loretta Mester said regarding both inflation and [a] later recession that, “It isn’t going to be immediate that we see 2% inflation. It will take a couple of years, but it will be moving down,” Mester said in an interview with CBS News this past Sunday.

According to CNBC, Mester also said she was not predicting a recession despite slowing growth; “We do have growth slowing to a little bit below-trend growth and we do have the unemployment rate moving up a little bit. And that is OK, we want to see some slowing in demand to get it in line with supply,” Mester added, referring to forecasts submitted in the past week by participants of the Federal Open Market Committee’s meeting.”

Added to the mix was this from The New York Times: “The Fed needs to hike policy rates more aggressively if it has any hope of bringing inflation down,” said Seema Shah, chief global strategist at Principal Global Investors. “If it’s going to have to tighten even more, then the chance of a recession is higher.”

These were pressures before as we noted in the March Jobs report, when we reported that “Many observers are mentally pushing Powell to increase the interest rate even further than the one-half point anticipated in early May,"

“The tightening from higher policy rates filters through the economy to make borrowing of all kinds — from mortgages to business debt — more expensive. That slows down the housing market, keeps consumers from spending and discourages corporate expansion, “ Shaw added.

But balance is needed since these moves are a ‘’blunt tool”‘ to use Powell’s terminology, and knowing when, and how to calibrate, is very tricky as many economists and academics note.

There are naysayers: “By the time you start to catch it and realize you did too much, you’re going to be deep in a trough,” said Dan Genter, the chief executive of Genter Capital Management, an investment advisory firm. “It’s going to take nine to 12 months before you see the total effects, and it takes that long to get out of it.”

 “All the talk of recessions and bear markets could also — at the margins at least — add to the economic pressure, in part because people see their investment, retirement or college savings accounts shrink and start to pull back on spending,” and with no sign of abatement in college tuition, many families are now becoming increasingly worried.

“The behavioral effect is that people will start to slow down on spending, become much more cautious, start to save more,” said Beth Ann Bovino, the chief U.S. economist at S&P Global. “That’s not a good outcome for the economy. It slows growth.”

The CPI report for July indicated that there was some relief with lowered prices on gas, airfares and used cars, to an increased rate of 8.5, lower compared with 9.1 the month before. And, while this offers some relief it is not the end, say most economists, which much more work to do, and that work is the domain of the Federal Reserve and expectations are for a less aggressive rate of half a point, versus the prior three-quarters.

One source of relief is the detangling of the bottle neck of the supply chain issues that so beleaguered world economies for so long, mostly attributable to problems in transportation and warehousing and shuttered factories, due to Covid.

We are not out of the woods on inflation, and Boston Fed president Susan Collins said, with great understatement, "at the moment, inflation remains too high."

Updated Sept. 27, 2022 at 2:04 p.m.CDT