“The labor market is extremely tight,” Mr. Powell said. He added that “employers are having difficulties filling job openings, an unprecedented number of workers are quitting to take new jobs and wages are rising at their fastest pace in many years.”
Inflation F.A.Q.
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What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.
Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains can lead to higher wages and job growth.
How does inflation affect the poor? Inflation can be especially hard to shoulder for poor households because they spend a bigger chunk of their budgets on necessities like food, housing and gas.
Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.
But that strong progress has been partly obscured by the quickly-increasing prices, which are chipping away at wages for many workers. Average hourly earnings growth has struggled to keep up with price increases in recent months.
President Biden called fighting high prices his “top priority” in his State of the Union address on Tuesday night. But while the White House has suggested changes that it and Congress could make to help to bring more supply into the economy — be it improving ocean shipping or fostering more domestic manufacturing — they would probably take time. When it comes to controlling inflation by slowing down demand, the Fed has primary responsibility.
“Inflation is too high, we understand that, and we’re working on it — it’s going to take some time, but we’re going to get it back under control,” Mr. Powell said. “By the way, we’re seeing this everywhere in the world. We’re seeing it more in the United States, because our economy is stronger, but we’re seeing it everywhere in the world.”
It is the case that pandemic-era price increases have proved surprisingly quick across much of the world.
Fed and White House officials, along with most private-sector economists, expected the pickup in the United States to slow down promptly last year. Instead, waves of coronavirus infections kept factories shut down, shipping routes remained clogged, consumer demand remained abnormally tilted toward goods and away from services, and costs continued to climb.
Now, as the price increases broaden beyond pandemic-affected goods and begin to push up rent and other service costs, officials are intently focused on bringing inflation down.
Article source: https://www.nytimes.com/2022/03/02/business/jerome-powell-interest-rates.html
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