Geoff: The federal reserve
raised interest rates again
today in its effort to stamp
down surging inflation.
The hike was a half percentage
point, a move that will affect
the pocketbooks of millions of
Americans.
Federal reserve chair Jay Powell
said more hikes are planned for
this summer and later in the
year.
The fed has changed its course
for steering the economy
considerably.
But as economics correspondent
Paul Solman reports, it's trying
to do so without triggering a
recession.
Paul: Today's rate hike combined
with the increase announced in
March means the federal reserve
is moving or word with the
biggest monetary tightening
since the year 2000.
It comes as the country endures
the highest inflation surge
since the 1970's, triggered by
the supply chain snags you've
kept seeing in footage like
this.
The government's pandemic
spending ballooning the annual
budget deficit, and now Russia's
invasion of Ukraine.
>> It is inflation people are
feeling all over the country and
it is important that they know
that we know how painful it is
and we are working hard on
fixing it.
Paul: Said critics argue that
years and years of new money
creation, all that so-called
quantitative easing, has set us
up for the inflation problem and
the fed is doing too little, too
late.
But chairman Powell reiterated
the fed expects to hike rates
several more times this year.
Practically speaking of course,
higher rates mean higher costs
for borrowing for a mortgage,
say, or a car lease.
And typically they hammer the
stock market, with the S&P index
down 13% so far this year.
But the big question is the one
the fed always faces, can it
dampen an overheated,
overinflated economy without
overdoing it and causing a
recession?
Steering its ever-elusive middle
course to a soft landing?
>> I think we have a good chance
to to have a soft or soft ish
landing if you will.
Businesses are in good financial
shape.
The labor market is as I
mentioned, very, very strong.
And so it doesn't seem to be
anywhere close to a downturn.
It's therefore the economy is
strong and is well positioned to
handle tighter monetary policy.
Paul: It is a historically
tricky bit of navigation right
now, with the world in turmoil,
prices surging over 6% last
month, while gdp actually
sagged .4% in the first quarter
of the year.
On the other hand, jobless
claims are at their lowest
level in decades.
And in March, employers posted a
record 11.5 million job
openings.
Dana Peterson is executive vice
president and chief economist at
the conference board.
>> I think this is an enormously
difficult task for the fed,
because the fed recognizes that
not all the drivers of inflation
are things that they can
directly control.
All of a sudden we have faster
inflation again caused by a
confluence of events.
And certainly meanwhile, you
have a full labor market and we
haven't seen this sort of thing
in quite some time where most
people are working.
Paul: So, finally, the fed has
begun to sell off some of its
debt portfolio, which has more
than doubled since March 2020,
and is up ninefold since the
crash of 2008, when the fed
began buying bonds to rescue the
economy.
For his part today, president
Biden touted the continued
strength of the economy and even
the reduction of the annual
deficit.
Pres. Biden: We are on track to
cut the federal deficit by
another $1.5 trillion by the end
of the fiscal year.
Paul: That is to -- due in no
small part to the end of some
pandemic spending programs.
But president Biden said his
economic policies have led to
growth and revenue that is
shrinking the deficit as well.
Pres. Biden: Bringing down the
deficit is one way to ease
inflationary pressures in an
economy where a consequence of a
war and gas prices and oil and a
food -- it is a different world
right this moment because of
Ukraine and Russia.
Paul: And the president noted
the government is paying down a
bit of the national debt for the
first time in six years.
For the pbs newshour, Paul
Solman.