Both of those conditions have been met since the fourth quarter of 2021, the economists said, suggesting there’s a “significant economic slowdown” (they stopped short of directly saying recession) ahead if history is any guide. Workers are in such intense demand these days that the higher wages they’re getting may drive consumer prices up further, even as that same price inflation erodes the buying power of their paychecks, the economists said. (Wage growth was the strongest it’s been in 40 years, according to a three-month moving average taken in February.) The Federal Reserve has been trying to bring this inflation under control by raising its benchmark interest rate to discourage borrowing and spending, but it’s unlikely the central bank will be able to accomplish this without triggering the slowdown, the economists predicted. Powell himself has admitted it will be a challenge to achieve a “soft landing,” where the Fed raises the benchmark interest rate without causing a recession, though it will succeed according to the latest projections from the central bank.In mid-March, Fed officials forecast that their favored measure of inflation would cool to 2.7% in 2023 (it was 6.4% in February) and that unemployment would stay low at 3.5%. Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
