Federal Reserve Expects Unemployment to Rise
The Federal Reserve ramped up its fight against inflation last week with a 0.75% rate hike and hinted to more interest rate increases in the future. The Central Bank expects a jump in unemployment as a result. "There will very likely be some softening of labor market conditions," Fed Chair Jerome Powell said during a press conference last week. "We will keep at it until we are confident the job is done."
The Fed raised its unemployment rate forecasts for the end of 2023 from its current level of 3.7% to 4.4%, which would mean roughly 1.2 million lost jobs, per ABC News. "The Fed has put forward a series of aggressive interest rate hikes in recent months as it tries to slash price increases by slowing the economy and choking off demand," the article reads. "But the approach risks tipping the U.S. into a recession and causing widespread joblessness."
Fed officials say a slight bump in unemployment is necessary if inflation is to cool. "I do anticipate that accomplishing price stability will require slower employment growth and a somewhat higher unemployment rate," Susan Collins, president of the Federal Reserve Bank of Boston, said Monday in a speech. "And I take very seriously that unemployment is painful, and that its costs have been disproportionately concentrated among groups that have traditionally been marginalized."