The Fed: Fed predicts big slowdown in economy and rising unemployment as it battles inflation

by | Sep 21, 2022 | Stock Market

The “pain” Americans are likely to endure from higher U.S. interest rates is a tepid economy in 2023 and rising layoffs and unemployment, the Federal Reserve said Wednesday. The central bank raised a key U.S. interest rate that influences the cost of borrowing for the fifth time this year. The rate hikes are meant to slow the economy enough to bring down the highest inflation in 40 years.

In a major speech last month, Fed Chairman Jerome Powell warned the public it would experience “some pain” as a result of the bank’s more aggressive effort effort to roll back inflation. A slowing economy would curb hiring and induce more layoffs as businesses faced the prospect of slower sales. The Fed wants to cool off a scorching labor market in which worker shortages are rapidly driving up wages and adding to inflation. In updated forecasts, the Fed predicts the economy will grow at a meager 0.2% annual pace this year and a lackluster 1.2% next year — well below the outsized 5.7% gain in 2021. The unemployment rate, meanwhile, is forecast to rise to as high as 4.4% in 2023 and stay there through 2024. The current jobless rate is 3.7%, just a few ticks above a half-century low. Historically such sizable increases in the unemployment rate foreshadow a pending recession. And a rising number of Wall Street
economists believe the U.S. will suffer a mild dow …

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