The Fed has decided the US will need a 'growth recession' to rein in inflation. Here's why it's bad news for job seekers.
bwinck@businessinsider.com (Ben Winck,Madison Hoff) - 7h ago
The chance of an economic "soft landing" has faded, and the Fed is pushing for a "growth recession."
The phrase describes a period of below-average growth, rising unemployment, and slowing inflation.
The Fed chair said that while it'd "bring some pain," letting inflation stay high would be worse.
In an ideal world, the Federal Reserve has already vanquished pandemic-era inflation while keeping unemployment at historic lows and avoiding a recession.
Hopes for such an outcome are all but entirely dashed, and the Fed has switched to plan B.
The central bank's message at its annual conference in Jackson Hole, Wyoming, this year was a simple and stark one. In remarks on August 26 that lasted less than 10 minutes, Jerome Powell, the Fed's chair, warned that cooling inflation would "bring some pain" to Americans through layoffs, weaker pay growth, and higher borrowing costs. He said that while the side effects are "unfortunate," a failure to slow price growth and normalize the economy "would mean far greater pain."
The speech laid to rest the idea that the US can enjoy a so-called soft landing, in which the Fed can bring inflation back to its 2% target without driving up unemployment. The central bank has been raising interest rates at the fastest pace since the 1980s in an attempt to ease Americans' demand and slow inflation. Powell clarified in the speech that additional rate hikes are on the way, further eroding optimism for a soft landing.
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