A growing number of economists are questioning whether the Fed's approach of raising interest rates to slow down an overstimulated economy makes sense today
y law, the U.S. Federal Reserve is supposed to be a champion of working families, instructed by Congress to aim for maximum employment and low inflation. But make no mistake, the central bank is not your friend—and a growing number of economists are questioning whether its age-old approach to combating high inflation makes sense.
Despite the good news, Fed officials were “probably hoping for more of a slowdown in the jobs report,” says, director of the Hutchins Center on Fiscal & Monetary Policy at the Brookings Institution. “What we’ve seen in the last couple of months with a falling rate of inflation and slowing wage growth at a very tight and strong labor market does challenge the conventional wisdom on which economists, including those at the Fed, generally rely,” Wessel tells TIME.
Wessel points out, for instance, that the Fed was likely glad to see the pace of wage increases come down. Average hourly pay grew 4.4% in January from a year earlier, down from a peak of 5.6% in March. Reich believes that the Fed has been too focused on the dangers of a tight labor market leading to higher wages, a stance that he says “neglects the other side of their mandate—to promote maximum employment.”
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