Federal Reserve Chair Jerome Powell said the US economy may be entering a “new normal” following disruptions from the Covid-19 pandemic.
“We continue to deal with an exceptionally unusual set of disruptions,” Powell told business and community leaders on Friday at a Fed Listens event in Washington.
“As policy makers we’re committed to using our tools to help see the economy through what has been a uniquely challenging period.”
In his brief welcoming marks, Powell didn’t discuss the outlook for interest rates or offer more specifics on the economic outlook.
All seven of the Board’s governors were present for the panel with Philip Jefferson and Lisa Cook making public comments in their roles as Fed officials for the first time.
Fed officials heard a consistent message that shortages and scarcity were still afflicting businesses along with high labour turnover.
Speaking about the small- and medium-sized companies they consult with, Cara Walton, for Harbour Results in Southfield, Michigan, said her clients “can’t find people,” and when they do find them, turnover is high.
US central bankers raised their benchmark lending rate by three quarters of a percentage points this week for a third straight time - the most aggressive pace of tightening seen since the Fed battled inflation back in the 1980s.
Powell and his colleagues are moving rapidly to reduce the highest inflation in nearly 40 years after being slow to spot the threat of broadening price pressures. Critics have slammed them for that error, although inflation has also been worsened by Russia’s invasion of Ukraine, which boosted food and energy prices around the world.
Fed Vice Chair Lael Brainard, speaking later during the event when the panel considered how families are adapting to the post-pandemic economy, noted that price pressures were hitting the most vulnerable particularly hard.
“We have seen high wage growth among the lowest income workers but looking overall, wages haven’t kept up with inflation and inflation is very high,” she said. “If we look at who bares the burden, everybody is affected by high inflation but of course it puts special burdens on lower income families as well as on people with fixed incomes.” US consumer prices rose 8.3% in the 12 months through August and officials have vowed to cool them even if that means causing harm to the US economy and its workers.
Officials couch this as an effort to slow excess demand and put the labour market back into “balance” - a euphemism that glosses over the fact many people could lose their jobs in the process. The labour market has so far remained strong, with unemployment at 3.7%, but policy makers this week forecast that would rise to around 4.4% next year as they continue to raise interest rates.
Fed Listens events have been held around the US since 2019 as the central bank sought public input on a review of its approach to monetary policy. That overhaul was completed in 2021 but the Fed has kept them going to maintain public engagement at a time when its actions remain front-page news.
In closing, Powell thanked the panellists for sharing their experiences of the post-pandemic economy.
“We get to spend a lot of time with data, here at the Fed. But I personally would say I need to hear narratives, I need to hear stories, about what’s really going on out there for it all to make sense,” he said. “We all learned a lot from you today.”
Jerome Powell, chairman of the US Federal Reserve.