According to William Dudley, President of Federal Reserve Bank of New York, stated Friday October 6 that he was surprised with low inflation. These comments by Dudley showed that leaders in the Fed are keeping a close eye on inflation because although inflation is low this year it is believed that it will increase. In order to control for this inflation we will more than likely see another interest rate increase in December.
In addition, the Fed has been trying to figure out why the tightening labor market hasn't resulted in an increase in wage and consumer price inflation. With all of the recent events such as hurricanes the U.S. lost 33,000 workers from its payrolls in the past month alone. However, unemployment fell to 4.2 percent. Furthermore, when we look at consumer price inflation it fell from 1.9 percent in January to 1.3 percent in the 12 months through August.
Although all of these factors seem to be calling for increased interest rates the Fed will be analyzing the economy closely and keep an open-mind. As long as we continue to make smart decisions we should be fine, but with the current administration I worry about who will be appointed to the Fed.
https://www.bloomberg.com/news/articles/2017-10-06/dudley-says-job-gains-should-lift-inflation-fed-should-tighten
It will be interesting to see how the FED acts with interest rates. Especially as they begin to wind down their $4.5 trillion balance sheet by a $50 billion a month taper with an eventual goal of having a balance sheet somewhere $2.5 trillion. As this is a tightening action the higher interet rates may slow down.
ReplyDeleteI think we will be fine in the long run, I think we need to focus on getting the labor force participation up. It makes no sense that our unemployment would go down after 30,00 jobs other than labor force participation dropped, we should focus on creating more jobs to enlarge the work force overall.
ReplyDeleteFrom August to September the labor force participation rate went up from 62.9% to 63.1%. This would account for the decrease in the unemployment rate. The 30,000 people that lost there jobs could be working lower skilled jobs to generate income and get by for the time being due to the damages caused by the hurricanes.
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