Interest Rates Likely to Stay High Despite Inflation Cooling

Interest Rates Likely to Stay High Despite Inflation Cooling

Interest Rates , Likely to Stay High , Despite Inflation Cooling.

In December, price growth in the United States cooled, despite the economy continuing to show signs of weakness.

NBC reports that inflation ended up at 6.5% compared to the same time in 2021.

In line with expectations, month-to-month inflation fell by 0.1% in December.

Despite the slowing rate of inflation, the Federal Reserve appears unlikely to pull back from its interest rate hike strategy.

According to Federal Reserve Chair Jerome Powell, the central bank will not stop hiking interest rates until inflation gets closer to 2%.

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NBC reports that the economy has been buoyed by a strong labor market.

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According to the Bureau of Labor Statistics, unemployment has reached a 53-year low, dropping to 3.5%.

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However, companies are still facing difficulty in filling positions, as evidenced by the 10.5 million job openings in the U.S. The high number of openings has led to an increase in wages, however the Fed warns that the trend is likely to translate into higher prices for consumers.

To be clear, strong wage growth is a good thing.

But for wage growth to be sustainable, it needs to be consistent with 2% inflation, Jerome Powell, Federal Reserve Chair, via NBC