Stocks brace for another historic rate hike | CNN Business


The labor market is still very, very strong. And while that’s great news for workers, it’s bad news for the Fed.

The mismatch in supply and demand for workers creates upward pressure on wages, and therefore inflation. People feel empowered to demand higher pay when they know managers are struggling to hire and retain staff. And higher pay = more spending money = more demand = higher prices.

To the Fed’s credit, that wage price spiral is a real and scary risk that it desperately wants to avoid. That doesn’t mean folks aren’t allowed to be angry about it. Democrats, especially, are sounding off, calling the Fed’s plan “foolish” and warning that Powell is going to be responsible for millions of layoffs if he doesn’t cool it with the rate hikes. The UN is also unhappy, saying the Fed’s policies risk inflicting more damage globally than the financial crisis in 2008 and the Covid-19 shock in 2020.

To which the Fed is more or less saying, look, we hear you, but we don’t have much choice here. Either we bring inflation down now and deal with “some pain” (read: layoffs, possible recession, wage depreciation), or bring inflation down later and deal with a lot of pain (all of the bad stuff, but worse).

Read more



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *