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The Hot Labor Market and Outlook for Fed Policy

Recent data on the labor market, including the October monthly employment report and weekly initial claims for unemployment insurance, indicate that excess demand for labor persists. The extremely tight labor market was an underlying theme of Fed Chair Powell’s press conference on November 2. The chart below shows the excess of job openings over the … Continue reading The Hot Labor Market and Outlook for Fed Policy

Is the Pace of Fed Tightening Slowing Soon?

The Consumer Price Index (CPI) for September all but guaranteed that the Fed on November 2 will hike the federal funds rate another 75 basis points to 3-3/4 to 4 percent from its current 3 to 3-1/4 percent. As shown in the chart below, headline inflation—the blue line—stayed above 8 percent in September while core … Continue reading Is the Pace of Fed Tightening Slowing Soon?

Fed Policy: Getting Closer

Recent news confirms that the Fed’s job of tightening monetary policy has a ways to go. The September employment report conveyed an ongoing tight labor market and the reluctance of idled workers to return to the labor force—with implications for a continuation of inflationary pressure coming from this market. The most recent report on job … Continue reading Fed Policy: Getting Closer

What Do the August CPI Data Tell Us About the Outlook for Inflation and Fed Policy?

The CPI data for August was not greeted warmly by financial markets, even though there was another drop in headline inflation (measured on a twelve-month basis, the blue line in the chart below). What unnerved market participants was the upturn in core inflation (that removes volatile food and energy prices) after several months of decline … Continue reading What Do the August CPI Data Tell Us About the Outlook for Inflation and Fed Policy?

Chair Powell’s Remarks: What Did He Say—and Why?

On August 26, Fed Chair Powell sent a jolt through financial markets with his remarks delivered to the Federal Reserve Bank of Kansas City’s annual central banking conference in Jackson Hole, Wyoming. What did he say and why did he say it—and is there anything more to be said? The Powell speech was focused on … Continue reading Chair Powell’s Remarks: What Did He Say—and Why?

Will Slower Inflation Lead to a Slowdown in Fed Tightening?

Headline inflation (that is, increases in the prices of all goods and services that consumers buy) has begun to slow. In July, the Consumer Price Index (CPI) showed no change from June in the average price that consumers pay for goods and services. Flatness in headline prices owed to a 4.6 percent decline in energy prices that … Continue reading Will Slower Inflation Lead to a Slowdown in Fed Tightening?

What’s Ahead for the Fed’s Inflation Fight?

On June 15, the Fed stepped up its anti-inflation effort, raising the target for the federal funds by 75 basis points for the first time in nearly three decades. Larger than expected increases in consumer prices and higher expectations of inflation by consumers were given as reasons for the unusual policy action by the Fed. … Continue reading What’s Ahead for the Fed’s Inflation Fight?