new economy

　　

On March 16, the Federal Reserve announced that it would raise the target range for the federal funds rate by 25 basis points to between 0.25% and 0.5%, the first rate increase since December 2018. The Fed statement said it expects continued increases in the target range to be 'appropriate' in the future, and that it will begin reducing its holdings of Treasurys, agency debt and agency mortgage-backed securities and begin the process of shrinking its balance sheet at its next policy meeting. Federal Reserve entered the tightening cycle, the spillover effect of its monetary policy caused widespread concern.

In a statement at the end of a two-day monetary policy meeting, the Fed said U.S. job growth has been strong and the unemployment rate has fallen sharply in recent months, but inflation remains elevated, reflecting supply-demand imbalances related to COVID-19, higher energy prices and broader price pressures. The Fed also released its latest economic outlook on the same day, cutting its forecast for US economic growth this year to 2.8% from the previous forecast of 4%, while raising its inflation forecast to 4.3% from 2.6%.

At present, inflationary pressure in the United States continues to rise. The US consumer price index rose 0.8% month-on-month in February and 7.9% year on year, the highest in nearly 40 years, labor Department data showed On March 10. USA Today notes that the Fed is taking aim "at the stubborn economic legacy of the pandemic: a surge in inflation". The Wall Street Journal commented that the Factors driving inflation are increasing, making it more difficult for the Fed to respond. Rising oil prices and continued supply chain disruptions left the Fed "facing an uphill battle against inflation".

According to a recent Gallup poll, 42 percent of Americans describe the state of the nation's economy as "bad," 70 percent say it is "getting worse," and 78 percent are dissatisfied with the direction of the country. The New York Times said rapidly rising costs are hitting consumers' wallets and eroding confidence. The burden falls mainly on low-income families, who spend a large portion of their budgets on daily necessities that are now rapidly becoming more expensive.

Timothy Gutbrod, 61, is a longtime Manhattan resident. "I work very hard, but my budget is very small," he said. For people who aren't making a lot of money, you have to be smart and start saving." Wages for average workers have not kept pace with inflation, and consumers are paying more at the pump, The Times said. Food prices in the United States have also risen sharply, making it difficult for consumers on tight budgets.

Ethan Harris, head of global economic research at Bank of America, said the Fed's decision to raise rates marked a major shift in monetary policy, with the bond market seeing the Fed's message as "hawkish." David Kelly, chief global strategist at jpmorgan Asset Management, said Fed officials have been very aggressive in signaling the direction of the fed funds rate this year, but there is a lot of uncertainty and a lot of financial assets are built on ultra-low interest rates and the hope is that the Fed will remain flexible.

Larry Summers, the former US Treasury secretary, has criticised the Fed for being too light on its response to inflation over the past year and "will have to move in a very different direction" to "avoid stagflation [high inflation and stagnant growth] and now the loss of confidence in the country by the American public". Diana Swonk, chief economist at The Accounting firm Jones & Co., said the Fed must walk a tightrope in its policy choices as U.S. inflation threatens to evolve from a temporary problem into a long-term one. "The biggest danger in this process is that once inflation takes root, it's very hard to get rid of it."