As the Fed is raising the interest rate, many expect that it will take a while for the inflation rate to come back to a normal level, because of the amount of spending the U.S. did during and after the covid-19 pandemic. Many consumers can feel the price increase in their day to day life, especially energy, like gas. The consumer price index has increased by 9.8 percent from March year earlier. Many economists think the package the U.S. government sent to its citizens during the pandemic was too large, and it is one of the primary contributors to the current inflation and rising prices. The current employment rate in the United States is 71.4%, just below 71.8% from this time last year. There are about 1.8 open jobs for every unemployed person in the U.S. , and wages are rising at the fastest pace in four decades, there is a very strong job market currently in the U.S.. The red hot job market could be a feeder for inflation, and the Fed will try to raise interest rates and use contractionary policies to try to slow down the economy, and bring supply and demand closer together.
Unfortunately, increased government spending was one of the only ways that our policymakers were able to rectify a lot of the economic damages caused by the Covid-19 pandemic.
ReplyDeleteI think the current state of the economy is very concerning with inflation being record high. However, I think there is hope as Fed Chairman, Jerome Powell is looking to continue increasing interest rates. The main issue I see is the Fed pushing too far and increasing interest rates too much too soon.
ReplyDeleteYou are right, unemployment rate is below its natural rate. However, the labor participation rate is also low. It means that many people are not looking for a job. Consequently, this number is not showing all truth.
ReplyDeleteI absolutely agree that the last COVID stimulus package was perhaps a little too much, however it's also hard to anticipate war with Russia almost a year ago. Considering how inflation remained relatively low during the pandemic with extra stimulus, I wonder if this last package was the catch-up from the other two packages, or if other factors are to blame.
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