The Washington Post reported in a report on Monday that the US economy is ending the current year in a significantly better position, exceeding all pessimistic expectations.
The US Federal Reserve praised the slowdown in inflation in the United States, and kept interest rates between 5.25 and 5.5 percent at its last meeting of the current year, although the battle against rising prices has not yet been decided, according to Agence France-Presse.
According to the newspaper, the inflation rate fell to 3.1% from 9.1%. The unemployment rate is 3.7%, and the economy grew at a good pace in the last quarter. The Fed is likely done raising interest rates and is looking to make cuts next year.
Financial markets have also reached or near all-time highs, and the Standard & Poor’s 500 Index may also set a new record this week.
Federal Reserve Chairman Jerome Powell confirmed in a press conference that “inflation has declined since its peak without a noticeable increase in unemployment. This is very good news,” but he noted that “inflation is still very high” and that “the path remains uncertain.” .
Powell’s enthusiasm, who is usually very cautious, was surprising, but he did not rule out the possibility of raising interest rates further if necessary.
“Chairman Powell had an optimistic tone,” said Rubeela Faruqui, an economist at High Frequency Economics.
In fact, “the inflation rate has fallen far below the Federal Reserve’s expectations, which opens the door to new possibilities in 2024,” according to Krishna Guha, an economist at Evercore, which specializes in providing banking and investment services.
This strength and stability in the economy, which defies even many of the most optimistic expectations, according to the newspaper, represents a remarkable development after the multiple economic crises that began with the Corona virus pandemic in 2020 and continued through the rise in inflation that the Federal Reserve and the White House were slow to recognize.
She explained that the Federal Reserve and the White House fought inflation on two different paths using completely different tools. But now, central bankers, US Treasury Secretary Janet Yellen, and US President Joe Biden’s economic experts are cautiously signaling that data and developments that were dismissed as almost impossible until very recently have been vindicated. This December, the Treasury secretary delivered an unusually direct rebuke, telling reporters that economists who predicted that low inflation would require widespread layoffs were “now going back on their word.”
“A lot of economists were saying there was no way for inflation to return to normal without involving a period of high unemployment or a recession,” Yellen told the Wall Street Journal last week.
“A year ago, I think many economists were saying a recession was inevitable and I never felt there was a solid intellectual basis for making such a prediction,” she added.
But the newspaper believes that there is still a lot of controversy about how to achieve a “soft landing” for the economy, and some deny that this happened, or that Powell or Yellen deserve praise.
For example, much of the decline in inflation came not from higher interest rates mandated by the Fed, but rather from supply chains clearing backlogs and falling energy prices, she said.
In addition, many Republicans still accuse the Fed and the Biden administration of exacerbating last year’s high inflation, the fastest price increases in four decades, and of the monetary policy interventions that followed.
They say that while prices won’t rise that fast anymore, they are still high, and higher interest rate increases have put the dream of homeownership out of reach for millions, a major talking point for the Republican Party ahead of the 2024 presidential election.
2023-12-19 03:05:45
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