After months of teetering on the edge, it seems inflation is declining steadily, to the point where the specter of mega-price jumps erasing savings and putting families at risk of destitution is fading, with the Consumer Price Index falling from 4% to 3% last month.
The Federal Reserve is taking a victory lap here, and they deserve some credit, though the extent to which their dramatic rate hikes were the driving force in cooling inflation is arguable; they had an impact, no doubt, but the resolution of a number of supply chain issues has potentially been the most significant factor, one that the central bank has little control over.
For them to be still on the rate hike war path is concerning, given the extent to which there is agreement — though obviously not consensus — in the economics sphere about the likelihood that we will be achieving our coveted soft landing has risen substantially, to the point that keeping a hand on the throttle might make us miss the runway in a catastrophic way.
Yet the Fed and its preternaturally conservative bent will do what it deems fit, just as it always has. For their part, consumers should feel more confident that the economy won’t fall out from under their feet. While low unemployment has been met with skepticism by Fed Chair Jay Powell, it’s good news for Americans who are not only seeing work, but seeing the labor crunch raise wages and grant them greater bargaining power, which has fed into something of an overdue organized labor blowback.
It’s not all sunshines and rainbows; mortgages remain very high, and certain adverse economic circumstances will not and cannot be fixed by top-down monetary policy, but by the painstaking work of long-term economic and infrastructure strategies.
Fed policy can impact but not ultimately address New York’s high rents, for example. Only sustained local pressure and incentives for housing construction can help. Still, if runaway inflation is one fewer issue that consumers have to worry about, we’ll count that as a win.
