Consumer spending has flattened and US manufacturing hit a nearly three-year low in March after years of growth coming out of the pandemic. In March, 236,000 jobs were added to the labor market.īut there have been signs that the economy is starting to cool.
Fed officials have probably been paying attention to that issue alongside signs that the jobs market remains robust. Though overall inflation has been cooling over the last few months, much of the tapering off was seen in the volatile energy sector, which a year ago saw price jumps following Russia’s invasion of Ukraine.Ĭore inflation, which excludes the more volatile energy and food prices, went up slightly in March as housing prices rose 8.2% over the last year. Inflation has steadily declined over the last few months but remains well above the Fed’s target rate of 2%. In March, the annual inflation rate was 5%, down from its peak of 9.1% in June and its lowest rate since 2021. “No one should assume that the Fed can protect the economy from the potential short- and long-term effects of a failure to pay our bills on time,” he said. The statement cut a phrase suggesting additional increases might be appropriate that was included in its last rate rise announcement.Īt a press conference, Powell said: “There is a sense that, you know, we’re much closer to the end of this than to the beginning.” But he warned that “future policy actions will depend on how events unfold”.Ĭongress is currently at loggerheads over the government’s borrowing limit and Powell said it was “essential” an agreement was reached. The statement hinted that the Fed’s rate rises – the fastest in 40 years – could be nearing an end. The committee remains highly attentive to inflation risks,” said the Fed. The extent of these effects remains uncertain. “Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. In a statement, the Fed said the banking system was “sound and resilient”. The Fed chair, Jerome Powell, has consistently argued that the central bank must prioritize bringing down inflation, which hit a 40-year high in the wake of the Covid-19 pandemic.
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