After the Covid 19 pandemic, Jerome Powell, a Bloomberg Federal Reserve Chair, said the US economy may be entering a new normal.
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Powell told business and community leaders Friday at the Fed Listens event in Washington, where he said we continue to deal with an unusual set of disruptions.
Powell didn't discuss the outlook for interest rates or offer more specifics on the economic outlook in his brief welcome marks. All seven of the Board's governors were present for the panel, with Philip Jefferson and Lisa Cook making public comments about their roles as Fed officials for the first time.
Fed officials heard a message that shortages and scarcity were still afflicting businesses along with high labor turnover. Cara Walton, who works with Harbour Results in Southfield, Michigan, said her clients can't find people, and when they do find them, turnover is high.
The US central bankers raised their benchmark lending rate by three quarters of a percentage point this week for a third straight time this week - the most aggressive pace of tightening since the Fed battled inflation back in the 1980 s.
Powell and his colleagues are moving quickly to reduce the highest inflation in nearly 40 years, even though they are not aware of the threat of broadening price pressures. Critics have slammed them for that error, but inflation has also been worsened by Russia's invasion of Ukraine, which has boosted food and energy prices around the world.
As the panel looked at how families are adapting to the post-pandemic economy, Fed Vice Chair Lael Brainard said that price pressures were hitting the most vulnerable particularly hard.
She said that the wages haven't kept up with inflation and inflation is very high and there has been high wage growth among the lowest income workers. If we look at who is burdened with high inflation, everyone is affected but it also puts special burdens on lower income families as well as on people with fixed incomes. The US consumer prices rose 8.3% in the past 12 months and officials have vowed to cool them even if that means harm to the US economy and its workers.
Officials call this an attempt to slow down excess demand and put the labor market back into balance - a euphemism that glosses over the fact that many people could lose their jobs in the process. The labor market has so far remained strong, with unemployment at 3.7%, but policy makers this week predicted that it would rise to around 4.4% next year, as they continue to raise interest rates.
Since 2019 Fed Listens events have been held around the US as the central bank sought public input on a review of its approach to monetary policy. The overhaul was completed in 2021, but the Fed has kept it going at a time when its actions are front-page news.
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