On March 22, the Federal Reserve Board Chair Jerome Powell announced that the Fed would raise interest rates .25 percent. CEPR’s Senior Economist Dean Baker responded with the following statement:
“It is unfortunate that the Fed decided to again raise interest rates. Wage growth has already slowed to a pace that is consistent with the Fed’s 2.0 percent inflation target. The average hourly earnings series increased at a 3.6 percent annual rate over the last three months, a pace often seen in 2018-19 when inflation was below the Fed’s target. Wage growth in the Employment Cost Index is slightly faster, at 4.0 percent in the fourth quarter, but with the 1.4 percent rate of productivity growth since the pandemic, this still would put it close to the Fed’s target.
Given that we are yet to feel the full impact of the Fed’s past rate hikes, and there is considerable uncertainty about the impact on credit of the banking crisis, it would have made much more sense for the Fed to pause to get more information before any further rate hikes. This increase needlessly adds stress to an economy that is already seeing turbulence from a number of different directions.”