Inflation in the last week has been a roller coaster of changes. the FED's favorite inflation gauge rose 4.2% for the last 12 months, ending in March. It is down from a previous 5.1% which is suggesting that the central's bank's plan to increase interest rates is to help stabilize prices. Good News is the compensation for the US workers grew in the first 3 months of the year, according to the Employment Cost Index (ECI). With the increase of labor costs, the central bank is watching reports of inflation closely as high labor costs is one of the causes for it's increase. What businesses tend to do is raise the amount you can get paid to hire and maintain employees which can lead to raising prices in goods and services. Even though interest rates are at a high, they began showing signs of cooling in march which suggests that the FED's mandate to stabilize prices and keep unemployment rates low could be more complex than intended.
Source: https://www.cnn.com/2023/04/30/business/stocks-week-ahead/index.html
I wonder if inflation will continue to drop or if the Fed will have to take even more drastic measures than they have to this point.
ReplyDeleteMy blog post also had to with inflation but in another country. This was an interesting comparison to what I wrote about and very informative about the work force and FED in the U.S. Hopefully interest rates can level out soon so that the economy can stabilize a little more post covid.
ReplyDeleteWe also must pay attention to the banking situation with these rate hikes. Prices may cool down with increasing interest rates, but financial institutions of all sizes will receive a burden
ReplyDeleteIn the past the Fed has pushed too far, leading to recession. I wonder if this will be the case again or if they have learned their lesson from previous interest rate hikes.
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