‘This Is Nuts’: Critics React as Fed Chair Justifies Coming ‘Pain’ for Working Families
Federal Reserve Chair Jerome Powell said in a closely watched speech Friday that the U.S. central bank is ready to inflict “pain” on households as it continues to fight inflation, remarks that drew widespread backlash from experts who warned the Fed appears poised to spark a devastating recession and mass layoffs.
Addressing a symposium of financial elites gathered in Jackson Hole, Wyoming, Powell said that “there will very likely be some softening of labor market conditions”—euphemistic phrasing for higher unemployment—as the Fed aggressively jacks up interest rates, slowing demand across the economy by making borrowing more expensive.
“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell continued.
But the Fed chief argued that such pain would be worth it because “a failure to restore price stability would mean far greater pain.”
Economist Robert Reich, the former U.S. labor secretary, responded bluntly to Powell’s comments: “This is nuts.”
“True, inflation is near a four-decade high,” Reich wrote in a blog post. “But the Fed’s aggressive effort to tame it through steep interest rate hikes—the fastest series of rate hikes since the early 1980s—is raising the risk of recession. If it raises rates again in September by another three-quarters of a point, which seems likely given Powell’s remarks today, the risk becomes larger.”
Reich added that the people are already feeling the pain, as “most Americans aren’t getting inflation-adjusted wage increases, which means they’re becoming poorer.”
Observers saw Powell’s remarks as his most hawkish message yet as the central bank attempts to rein in inflation with a blunt tool that is unlikely to mitigate the causes of price surges in the U.S. and globally, something the Fed chair has openly admitted to lawmakers.
“The Fed’s problem remains that constraining demand can’t do anything about the primary drivers of inflation—supply chain snarls, the war in Ukraine, and corporate profiteering,” tweeted Claire Guzdar of the Groundwork Collaborative. “Our problem remains that the Fed apparently won’t stop raising rates until millions more lose employment.”
Originally published at Commondreams.org.
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