Fed chair Jerome Powell: No sign of stagflation in US economy

Federal Reserve Chair Jerome Powell: No Sign of Stagflation in the Economy

In remarks following the release of the Fed’s decision Wednesday to leave interest rates unchanged, Federal Reserve Chair Jerome Powell dismissed the notion of stagflation in the economy. Despite persistently high inflation and signs of slowing growth, Powell emphasized that solid economic data does not support the existence of stagflation.

Understanding Stagflation

Stagflation historically occurs when high unemployment, slow economic growth, and high inflation coincide. However, Powell compared today’s economy to the 1970s, the period commonly associated with stagflation, and highlighted that both inflation rates and the unemployment rate are below 4%.

“I don’t see the stag, or the ‘flation,” Powell stated.

Economists Agree with Powell

Most economists concur with Powell’s assessment. Bank of America analysts, in a recent note to clients titled “No sign of ‘stagflation,'” attributed the lower-than-expected GDP report for the first quarter to accounting factors rather than weakening demand. They noted that consumer spending remains resilient, potentially contributing to sustained high inflation.

Pantheon Macroeconomics chief economist Ian Shepherdson also dismissed fears of stagflation in a note to clients. Despite weaker manufacturing data, Shepherdson emphasized the overall growth of the US economy and the slow but steady softening in price increases.

Comparing Today’s Economy to the 1970s

Data indicates that the current US economy is in a better state than the 1970s. The previous decade was characterized by oil-supply shocks, soaring gasoline prices, leaving the gold standard, powerful unions demanding higher wages, and government price control policies. In contrast, wage growth in 2024 has largely kept pace with inflation, and the impact of the pandemic on food and goods prices has subsided.

Furthermore, although interest rates are high, they are lower than they were 50 years ago. Adjusted for inflation, the average cost of a gallon of gasoline in 1974 is comparable to today’s prices.

The Fed’s Approach and Future Outlook

During his press conference, Powell stated that the central bank would maintain interest rates between 5.25% and 5.5% to allow inflation to subside. He emphasized the luxury of strong growth and a robust labor market. However, it remains uncertain how long inflation will remain above the Fed’s 2% target.

Moody’s economist Matt Colyer noted that shelter costs have been a significant contributor to high inflation. As other components, such as auto insurance and healthcare, also contribute to inflation, the Fed will need to observe a sustained period of disinflation before considering rate cuts.

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 1: No Poverty
• SDG 3: Good Health and Well-being
• SDG 8: Decent Work and Economic Growth
• SDG 10: Reduced Inequalities
• SDG 12: Responsible Consumption and Production

The issues highlighted in the article are related to poverty, economic growth, and inflation, which are connected to the SDGs mentioned above.

2. What specific targets under those SDGs can be identified based on the article’s content?

• Target 1.2: By 2030, reduce at least by half the proportion of men, women, and children of all ages living in poverty in all its dimensions according to national definitions
• Target 3.4: By 2030, reduce by one-third premature mortality from non-communicable diseases through prevention and treatment and promote mental health and well-being
• Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value
• Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average
• Target 12.2: By 2030, achieve the sustainable management and efficient use of natural resources

Based on the issues discussed in the article, these targets are relevant to addressing poverty, improving health and well-being, promoting decent work and economic growth, reducing inequalities, and promoting responsible consumption and production.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

No specific indicators are mentioned or implied in the article that can be used to measure progress towards the identified targets. The article mainly focuses on discussing the current state of the economy and inflation, without providing specific data or indicators.

Copyright: Dive into this article, curated with care by SDG Investors Inc. Our advanced AI technology searches through vast amounts of data to spotlight how we are all moving forward with the Sustainable Development Goals. While we own the rights to this content, we invite you to share it to help spread knowledge and spark action on the SDGs.

Fuente: nbcnews.com

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