The Fed anticipates a rise in unemployment to bring inflation down

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Washington (EFE).- The members of the Federal Open Market Committee of the United States Federal Reserve (Fed) predict that unemployment will have to rise in the country for inflation to fall, according to what is extracted from the minutes of their last meeting of last September published this Wednesday.

in this meeting the Fed announced a 0.75 point hike in interest ratesthe fifth since March, confirming the orientation started six months ago to reduce inflation.

At the meeting, held between September 20 and 21, participants assumed that “supply and demand imbalances in the labor market will gradually decline and the unemployment rate is likely to rise, reflecting in somewhat the effects of a more restrictive monetary policy,” the minutes read.

persistent inflationary pressure

At the Fed, they felt that “an easing of the labor market would be necessary to alleviate upward pressure on wages and prices”.

The Fed’s Federal Open Market Committee is made up of the seven members of the Board of Governors, the chairman of the New York Reserve, and four other regional chairs who rotate annually.

The minutes of this last meeting hardly provide any new data on the country’s economic situation, although they do reflect the views of the meeting participants, where they “emphasized that the cost of taking little action to reduce inflation probably outweighs the cost of acting too”.

The file photo shows a man shopping at a supermarket in Washington. EFE/Michael Reynolds

For this reason, some of the participants stressed the need to maintain a restrictive monetary policy for as long as necessary, while “a few” of them recalled “historical experience” on the danger of prematurely ending this type of measures to reduce inflation.

Regarding the shortage, participants in the meeting expect inflationary pressures to persist in the short term and cite as factors supporting this prediction the situation in the labor market, persistent problems in the supply chain procurement and service price increases.

In the medium term, they predict a gradual decline in prices in the years to come.

Actions against inflation

In the discussion on future measures, committee members argued that further rate hikes will be “adequate”, thus maintaining “a restrictive policy stance”.

Alongside the rate hike, the Fed unveiled its economic forecast in September, which sees an interest rate of 4.4% by the end of 2022, one point above what was estimated in June. .

By the end of 2023, he expects rates to rise slightly to 4.6%, before falling back to 2.9% by the end of 2025.

According to the latest inflation data, released last month, the interannual rate of the consumer price index (CPI) fell by two ticks in August, to 8.3%, although in monthly terms, prices have increased by a tenth compared to July.

This is the second continuous drop in the year-on-year inflation rate, which in June reached its highest level in forty years, 9.1%, and in July it fell to 8.5%.

The fall gave a little respite to the American economy, which entered at the end of July what experts consider a technical recession by chaining two quarters of falls in gross domestic product (GDP).

Web editor: Juan David Mosos

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