May 23, 2022 — Powell Favors Lower Inflation over Full Employment

MAY 23, 2022 – POWELL FAVORS LOWER INFLATION OVER FULL EMPLOYMENT

Fed Chair Jerome Powell hopes to bring down inflation while preserving a strong labor market but admits “some pain could be involved.” Powell was speaking at The Future of Everything Festival last week.  He said it seems the unemployment rate consistent with stable inflation is likely well above 3.6 percent but hopes the bank can tame inflation without causing a huge rise in unemployment rates.

Consumers and businesses seem to be financially solid, so it’s hoped there will be a cushion, making the likely recession short and shallow.  Where the Fed thinks rates will have to climb to in order to curb inflation is not clear, but the hope is they not rise much above 3 percent, but they are open to going even higher if needed. April’s inflation numbers will be released later this week, and expectations are for a slight drop from March figures. But Powell said, “We need to see inflation coming down in a convincing way. Until we do, we keep on going.”

We emphasize the foresight to review your future interest rate obligations now and look at interest rate hedges as a way to lock in historically low rates before the Fed raises rates another 0.5 percent at their next meeting.