Federal Reserve Chair Jerome Powell and Patrick Harker, head of the Federal Reserve Bank of Philadelphia, engaged with small business owners in York, Pennsylvania on Monday. The visit was part of an effort to gain a more diverse perspective on the economic challenges faced in the post-pandemic era. The businesspeople they interacted with expressed concerns about high inflation, elevated interest rates, and persistent labor shortages that are hindering their operations.
The business owners conveyed their struggle to find sufficient workers, while higher interest rates have deterred some from expanding their operations. Julie Flinchbaugh Keene, co-owner of Flinchbaugh’s Orchard & Farm Market, expressed her concern over the unpredictability brought by inflation since the onset of the pandemic more than three years ago. She said, "predictability is just gone. It’s very hard to operate a business without predictability."
Responding to these concerns, Powell assured, “We’ll get inflation down." This statement comes as the Federal Reserve continues to monitor the economy for signs that its series of rate increases are having the intended effect and that inflation is gradually cooling down.
Two weeks ago, during their most recent meeting, Fed officials signaled confidence about a so-called “soft landing,” where they anticipate inflation will fall back to their 2% target without triggering a deep recession. Policymakers predicted that inflation would decline to approximately 2.6% by the end of 2024, with only a slight increase in the unemployment rate.
Despite this optimism, the Federal Reserve also indicated that it expects to maintain its benchmark rate higher for longer, potentially raising it once more this year and keeping it above 5% well into 2024. This decision comes after observing inflation dwindle from a four-decade high of 9.1% in June 2022 to 3.7% in August 2023.
In the meantime, the unemployment rate has defied predictions by remaining low while the economy continues to expand. Powell emphasized the importance of strong labor market conditions to boost wages for the lowest-income workers, stating, "To have that, though, we need price stability."
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