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Armchair economists who take to social media with all the answers likely got a shock last week when U.S. Federal Reserve Chairman Jerome Powell proclaimed the Fed will raise its benchmark short-term interest rate fast and high enough to restrain growth and hiring, should it decide that is necessary to curb inflation.
Powell told the National Association for Business Economics policymakers could reach "restrictive" territory that would slow the economy and raise the unemployment rate, if that is what it takes to "ensure a return to price stability."
"In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than (a quarter-point) at a meeting or meetings, we will do so," Powell said.
For almost two years now, the Fed has gone easy on the economy, which has netted criticism that it is reacting too slowly to prices driving inflation to 40-year highs. Their solution now might be painful, but Powell seems to think we can handle it.
He pointed to a near-record-high level of open jobs, among other economic indicators, and suggested higher rates from the Fed could slow consumer spending enough to reduce that outsized demand for workers, which would, in turn, reduce wage growth to a level that wouldn't boost inflation.
"This is a labor market that is out of balance," Powell said. Good for workers, because it means higher pay for many, but also leading companies to raise prices to offset their higher labor costs.
"We need the labor market to be sustainably tight," he said.
Not quite what you were looking for when you were asking the wrong federal official to "do something" about higher prices, is it?
Something's got to give, and this is how the federal government gets it done. As is almost always the case, those of us living in struggling Appalachian communities are likely to suffer more because of such action than those in other parts of the country. But there is no having our cake and eating it, too, when it comes to the economy.