The Federal Reserve’s effort to control inflation isn’t over; high prices are still a concern for Americans, businesses, and policymakers.
Recent data show inflation nearing the Fed’s 2% target, but this doesn’t mean all is well.
Goldman Sachs predicted that soon released figures could show inflation around 2% for the favored Fed measure.
San Francisco Fed President Mary Daly emphasized that while inflation is easing, the fight is not over.
She stated, “We must stay vigilant and intentional,” at an event in New York.
Inflation is not dead
Daly shared a story of someone questioning her about declaring victory over inflation. She explained that interest rates remain high, suggesting inflation isn’t fully controlled yet.
In September, inflation was reported at 2.4%, down from 9.1% in June 2022. The main concern is that while some measures of inflation are improving, others are still stubbornly high.
Inflation has been over the Fed’s 2% target since March 2021. Despite predictions of it being temporary, inflation continues to rise steadily.
Specific areas, like food and housing, have seen significant price increases, making life more challenging for many.
Borrowing to pay higher prices
Consumers are adapting to higher prices with increased spending, reaching nearly $20 trillion in the second quarter of 2023.
However, household debt has also risen significantly, with delinquencies beginning to increase, which is concerning for future financial stability.
The Fed’s choice
The Fed faces a tough decision in its upcoming meeting, as markets react skeptically following recent interest rate cuts.
Some economists suggest the Fed should pause rate cuts until inflation is more stable, highlighting the ongoing struggle with inflation.
Daly reassured that she views victory as helping everyone catch up economically.
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