By Craig Erwin, Ph.D.
The Federal Reserve’s (the U.S. central bank’s) job is to maintain full employment and stable prices and interest rates. But the Fed can’t reduce unemployment to zero; not only is that impossible, it would cause enormous problems. So, the Fed tries to keep unemployment low, but not so low that it causes rapid wage inflation. And the Fed tries to keep prices of goods and services low, but it does not care about real estate, Bitcoin, or stock prices. The Fed is focused instead on keeping prices stable for goods and services that we buy regularly, such as gas, cereal, milk, coffee, clothes, toys, and medical care. Right now the Fed is focused primarily on keeping prices stable because the unemployment rate, at 4%, is near the lowest level in the past twenty years and long term interest rates have been very low for about 15 years. So, all the Fed needs to worry about now is inflation, and it has made it abundantly clear that, yes, it really is worried. You can expect it to be vigilant for the foreseeable future.
Are you worried about inflation? How much does it cost you to fill your gas tank? Have you noticed some prices rising fast? What are your biggest expenses?
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