Anonymous #1 5d

didn't they give up the inflation fight to try and save the jobs market?

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Anonymous #2 5d

*try to

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Anonymous #2 5d

Kind of. Inflation has started to be stubborn and high interest rates, which generally (but not always) help rein in inflation, usually negatively impact the job market if they go on for too long

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Anonymous #1 5d

no because this market is actually irrational 😭

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Anonymous #2 5d

Like #3 said, kind of! The Fed has a dual mandate (aka two goals). The first is to keep inflation at a healthy level. 2% year over year is seen as “healthy” since it shows economic growth! Less than 2% shows it’s slowing, a decrease is pretty bad, and more than 2% can also be an overheating economy, but it also means that the money supply is increasing faster than wages

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Anonymous #2 5d

The other goal the Fed has is to keep unemployment low. The issue is that the dual mandate has two issues with opposite solutions. When unemployment is on the rise, the Fed cuts rates, promoting borrowing, and in turn promoting hiring. When inflation is high, they raise rates, making people less willing to borrow, causing less money to flow through the economy. What we’re seeing now is a want for the Fed to cut rates as inflation is still calming down from COVID!

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Anonymous #2 5d

(Last one i swear) Typically, you’d expect inflation to be returning to that 2% mark right now because the economy has cooled off a lot and hiring has also slowed. This would guarantee a rate cut. However, the tariffs still have inflation lingering higher than it should (right now 3% in a year). The Fed has decided to put inflation to the side and are likely to cut rates for the job market, meaning inflation will go up as expected but it’ll be on 3% inflation rather than 2%. (Source: econ major)

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