Fed more concerned about prices than full employment

The Federal Reserve (Fed) of the United States must continue to increase interest rates with increases greater than usual, of half a percentage point, to contain inflation, central bankers agreed; however, they acknowledge that doing so would trigger higher unemployment.

The comments show that Fed policymakers are, at the moment, more interested in reining in price pressures than making sure that every American who wants a job can get one, or at least feels they can’t get the latter without doing the first.

“I think 50 basis points of hikes in the next two meetings makes perfect sense,” Cleveland Fed President Loretta Mester told Yahoo Finance. “It is very possible that unemployment will go up a little bit and we may have another quarter of negative or slow growth, but that will have to happen if we want to reduce inflation.”

However, Mester does not believe that there is a trade-off between the two goals: 2% inflation and full employment, “because I think that if we do not return to price stability, we are not going to have sustainable healthy labor markets in the future.” .

New York Fed President John Williams agreed that the cost of reducing inflation would be a slight increase in the unemployment rate, which currently stands at 3.6% and indicates a labor market that, by many measures, , is the strongest in 50 years.

“When I think about a soft landing it’s a question of yes we could see below-trend growth for a while and we would definitely see an increase in unemployment, but not in a huge way,” Williams said at a conference organized by the Bundesbank in Germany. “I think that’s the challenge.”

My priority is to fight inflation: Biden

The president of the United States, Joe Biden, assured that inflation is his main national priority, at a time when the rise in prices weighs on family budgets and on his popularity.

I want every American to know that I take inflation very seriously.”

Biden argued that some of the roots of inflation are beyond his control, such as the Covid-19 pandemic or the effects of the war between Russia and Ukraine.

“That is why we are witnessing a historic inflation in the entire world,” he insisted, noting that it is not a problem exclusive to the United States.

In March, 60% of the country’s inflation came from rising gasoline prices due to the conflict in Ukraine, he said. A record $4,374 per gallon was posted yesterday, up from the March 11 record of $4.33. (AFP)