In 2022, when the Federal Reserve’s focus shifted to combatting inflation, it had to ratchet up interest rates fast to get monetary policy caught up with fast-rising prices.
Two years later, the focus has changed again – this time to protecting the job market, as outlined in Chair Jerome Powell’s speech Friday at the Fed’s annual Jackson Hole conference. A policy catch-up again appears to be needed – in the other direction, albeit at a likely less frantic speed.
Powell’s signal of coming rate cuts completed a Fed shift that began in January when it acknowledged emerging job market risks, and now it has made countering those its top job.
The open question: Are a weakening job market and rising unemployment rate evidence of an economy settling into a healthy place of steady growth with little upside risk to the jobless rate or part of a slide that will gather speed?
The answer will appear …