June 13, 2023
When a kitten or puppy waves their paws at us, it is considered major cuteness in action. When the Federal Reserve Board is faced with a decision regarding the “pausing” of interest rate hikes, there is no cuteness involved – just a bunch of hemming and hawing (not pawing). So, the Fed did consider a pause, but they won’t call it a pause even though they did not raise rates. Why is that?
Because they don’t want to go on record saying that the fight against inflation is over. They are just “catching their breath” and keeping an eye on things before they decide what they are going to do next. The current inflation rate is somewhere around four percent and heading downward slowly. Certainly, that is much better than the inflation rate of 12 months ago, but it is still twice as high as the Fed’s official target of two percent. We have seen some real progress in certain areas, for example, you no longer need to take out a bank loan to purchase a dozen eggs! Lumber and wheat prices are also down significantly from their peaks.
On the other hand, the labor situation is still causing concern. We just don’t have enough workers to fill the almost 10 million jobs open in America. In the past we have always had enough of a flow of legal immigrants to fill jobs—but today the job openings far outweigh the increase of the residential population and legal immigrants together. With a shortage of workers, higher wages are the sticking point in the inflation battle. Not enough workers and not enough homes to put them in. So, while the Fed catches their breath—these are the things they are keeping their eyes on.
Source: Origination Pro