Federal Reserve officials are entering an uncertain summer. They are not sure how quickly inflation will cool, how much the economy is likely to slow or just how long interest rates need to stay high in order to make sure that quick price increases are fully vanquished.
What they do know is that, for now, the job market and broader economy are holding up even in the face of higher borrowing costs. And given that, the Fed has a safe play: Do nothing.
That is the message central bankers are likely to send at their two-day meeting this week, which concludes on Wednesday. Officials are expected to leave interest rates unchanged while avoiding any firm commitment about when they will cut them.
Investors do not expect a rate cut at the Fed’s next meeting in July, after which policymakers will not meet again until September. That gives officials several months of data and plenty of time to think about their next move. And because the economy is holding up, central bankers have the wiggle room to keep rates unchanged as they wait to see if inflation will decelerate without worrying that they are on the brink of plunging the economy into a sharp downturn.
@Gr33nPartySamRepublican2mos2MO
"Car loans are too expensive, but..."
"Mortgages are out of reach for first time home buyers, but..."
"Inflation impacts lower income people more severely because more of their income is spent on food and energy, but..."
"Credit card rates are making it harder for people to manage their debt, but..."
What comes after the "but" is always some version of telling people they're confused, petulant, or misinformed. I'd ask you to pay more attention to the first half of those sentences. These aren't just interesting side plots in the economy. For most Americans, these issues are the ENTIRE ECONOMY.
@BrainyC1v1cDutyDemocrat2mos2MO
It really depends on where you are in your life trajectory. For me it works because I already own a home purchased at low interest rates, our cars are paid off, and I am enjoying higher interest rates on my bank accounts and better returns from bonds. Were I 28 still and looking to buy my first house, this would be terrible.
@GreenPartyChoughDemocrat2mos2MO
Corporate price gouging is a huge factor.
"In the past, corporate profit growth accounted for maybe a third of inflation. But a report from the Kansas City Fed found that nearly 60% of inflation in 2021 was because of corporate profits."
I have been reading a lot lately about grocery companies and other distributers of essential products realizing much, much higher profits lately. I would like Krugman to address this directly.
@SugaryExecutiveSocialist2mos2MO
There are numerous studies that have been done that show that corporate profiteering (price gouging) for a percentage of inflation before the pandemic was at about 11%.
That number has jumped to 51% for ALL inflation. (and rising)
@P0l1t1calTruffleMountain2mos2MO
Interest rate near 0%, like we had for so long, is unhealthy for the economy. It's promotes speculation and debt crises. So it's probably time to reduce rates slightly, but only slightly, we should never want to go back to ultra low interest rates. A healthy interest rate promotes productive business activities that generate wealth. And that's part of the reason the economy is doing so well.
@W3lfareAvaVeteran2mos2MO
Interest rates are right were they should be. The near zero rates of the past decade have allowed the financial market engineer enormous leveraged plays at no cost which create little actual value.
If interest rates at 7% on a car loan make automobiles hard to buy that is a good thing.
Everything on the lots is oversized, over optioned and over priced.
That same applies to housing.
Everything being build around here is oversized with three car garages. When those sit on the market maybe the industry will start building capes and ranches again.
@RoadrunnerBertieDemocrat2mos2MO
Our current economy is the healthiest economy we have ever had. Strong growth, extremely low and sustained unemployment, low inflation (less than 3%). The main goal of economic policy should be low unemployment. Let's give credit where credit is due.
@ISIDEWITH2mos2MO
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