The Fed keeps raising interest rates. Working people are getting hammered by it
Friday at Jackson Hole, Wyoming, Federal Reserve chairperson Jerome Powell said the Fed must continue to raise interest rates, even though it will “bring some pain to households and businesses”.
This – with all due respect – is nuts.
True, inflation is near a four-decade high. But the Fed’s aggressive effort to tame it through steep interest rate hikes – the fastest series of rate hikes since the early 1980s – raises the risk of recession. Powell’s remarks signal that the Fed will probably increase rates again in September by another three-quarter of a percent, raising the risk still further.
The pain is already being felt across the land. Wage gains haven’t kept up with inflation. This means most Americans continue to lose economic ground.
Powell is in effect telling them they’ll lose even more ground. Higher interest rates, he admits, will slow economic growth and result in “softer” labor market conditions – a euphemism for lower wage increases and fewer jobs. But “these are the unfortunate costs of reducing inflation”.
Meanwhile, though, corporate profits continue to soar. Profit margins are at their highest since 1950, according to Commerce Department figures published Thursday.
Stop for a moment and let your mind dwell on this: the prices businesses are charging their customers are outpacing whatever increased costs businesses are facing for materials and labor.
In other words, wages aren’t pushing up inflation. The costs of production aren’t pushing up inflation.
Corporations are pushing up inflation. The biggest single unique source of inflation in the United States is the pricing power of corporations.
So why is the Fed raising interest rates? Because that’s what the Fed does when prices are rising. That’s the only tool
Read more on theguardian.com
