How The Federal Reserve Plans To Fight Inflation

Dayana Sabatin
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According to Insider, Jerome Powell, the Federal Reserve chair, said that the US needs a "growth recession" to rein in inflation. This is incredibly bad for people looking for a job.

A growth recession essentially describes a period of below-average growth, rising unemployment, and slowing inflation.

Powell says that while it will bring pain, letting inflation stay high would be even worse.

The speech laid to rest the idea of a so-called soft landing, where the Fed can bring inflation back to its 2% target without driving up unemployment.

The central bank has also been raising interest rates at the fastest pace since the 1980s in their attempt to ease Americans' demand and slow inflation.

Powell also said that additional rate hikes are on the way.

A "growth recession," is a period of slow economic growth and higher unemployment. It's not stagflation, but it's a brute-force way to stamp out inflation, and Powell's remarks are signaling it's what the Fed is turning to after more than a year of faster-than-usual price growth.

Americans about to return to the labor market and look for a new job are going to feel an incredible amount of pain.

"Reducing inflation is likely to require a sustained period of below-trend growth, and there will very likely be some softening of labor-market conditions," says Powell.

In addition to this, a growth recession will likely drive the unemployment rate higher if enough companies lay off their workers to bolster their balance sheets. And from what we've seen lately, numerous companies are laying off employees.

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