The latest inflation data showed that the pace of price hikes is picking up speed — the Consumer Price Index for August nudged up to 2.9%. However, it’s likely tame enough that the Federal Reserve won’t stay on pause Wednesday.
That’s because the other side of the Fed’s dual mandate is sending an S.O.S.: the labor market.
Job growth not only has been far weaker than expected, but the latest data showed that the US economy lost jobs in June. It was the first time in nearly five years that the economy didn’t add jobs on a monthly basis.
A rate cut from the central bank, even by a small amount, could be enough to shore up some confidence in businesses and keep a floor under the labor market and elsewhere, economists told CNN recently.
But the extent to which a quarter-point cut would bring relief to Americans watching prices go up remains to be seen.
“It’s pretty clear that the labor market has shifted into a lower gear,” said Tyler Schipper, associate professor in economics and data analytics at St. Thomas University in St. Paul, Minnesota.
“But what consumers are hearing is, ‘my job is at risk, and grocery store prices are still accelerating.’ And I don’t know that a headline that the Fed cuts interest rates by (a quarter-point) is really going to be the salve that makes the problem go away.”
