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The Federal Reserve has two objectives: minimize inflation and maximize employment. It pursues these goals at Federal Open Market Committee meetings — one of which will happen in a little over a week — where it can tinker with the interest rate.
While the Fed might not raise interest rates at this meeting, it will certainly have to do so eventually to combat inflation. September’s inflation data showed that over the last year, the consumer price index rose 3.7%, the producer price index rose 6.3%, and the importer price index
rose 8.1%.
But while higher interest rates can help fight inflation, they also impact the labor market. Recently, the Fed hasn’t been quite so focused on jobs, though.
“The thing I’ve been telling people is just that the labor market is actually, frankly, quite boring right now,” said Preston Mui, senior economist with the advocacy group Employ America.
Mui pointed out that boring isn’t bad.
“There are parts of it that are sluggish, such as wage growth and hiring
,” Mui said. “But we’re not seeing any sort of imminent collapse either. And so I think that’s why the Fed feels comfortable shifting its focus towards inflation.”
If the Fed raises rates, some industries are likely to shed jobs — like housing. |