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What the Fed Talks About When It Talks About Pain

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Fed officials, in particular, are watching closely as it is one of the last major economic data releases before the mid-September policy meeting.

Wait — the Federal Reserve wants Less than job growth? It seems counter-intuitive, but it is. The Federal Reserve has a dual mandate to ensure maximum employment (which we have) and price stability (which we don’t). And, as Chairman Jay Powell bluntly reminded the world last week in Jackson Hole, the Fed will keep raising interest rates until inflation subsides (which makes borrowing more expensive and slows down business activity).

It’s a long way. The price surge has hovered around his 8.5%, the highest in 40 years. The Fed wants to bring it down to 2%.

In effect, the Federal Reserve is betting that the resulting unemployment pain will be less pervasive than the inflation pain.

Key Quote: “If prices are not stable, the economy will not work for anyone.”

Of course, not everyone agrees with the Fed’s strategy. Many of the root causes of inflation, such as supply chain disruptions, pandemics and geopolitical tensions, are outside the jurisdiction of central banks. Interest rate hikes address the demand side (consumers buy less) rather than the supply side.

“what [Powell] Calling it ‘some pain’ means putting people out of work and closing small businesses because the cost of money goes up,” Sen. Elizabeth Warren told CNN’s Dana Bash last weekend. rice field.

she’s not wrong Powell often euphemistically calls it a “softening of labor market conditions.” What he means is that higher unemployment, which means lower consumer spending, will lower prices.

bottom line

The Federal Reserve is trying to trade one kind of pain (inflation) for another kind of pain (unemployment).

But Powell has repeatedly said the strength of the labor market is proof that the economy can withstand higher interest rates. Of course, that’s no comfort to those whose work is on the cutting board.

A third three-quarter rate hike is not a foregone conclusion. The Fed should weigh tomorrow’s employment numbers alongside the CPI results released a week before his Sept. 21 central bank meeting to get a clearer picture of the inflation puzzle. .

Number of days: 155,000

At least 155,000 British workers, including rail workers, lawyers, journalists and postal service staff, are on strike demanding higher wages as inflation rises to its highest level in decades doing.

This is one of the most significant waves of industrial unrest in the UK since the ‘winter of discontent’ of the late 1970s. At this time, rampant inflation drove workers into a massive strike.

edit button

Well, as a reward, here’s some not-so-bad, relatively Musk-free news from Twitter.

It took only 800 years of pleading and begging, but the Twitter gods have finally granted the world’s demand for the weird edit button.

“This is happening, but you’ll be fine,” the company tweeted. See Twitter, everyone needs an editor.)

This shouldn’t come as a big surprise — Twitter was teased back in April, the same day that Elon Musk was announced to join the board (laughs).

(ICYMI, Musk accepted a board seat and was released on bail days later. He then offered to buy Twitter outright. And now he’s trying to keep it in court. Can you feel the pattern?)

The lack of an edit button has been a problem since Twitter came out. Facebook and Instagram have had it for years. Why, oh why, Twitter, have you made me suffer public shame for my spelling mistakes and general carelessness?

Apparently some people worry that the edits will be weaponized, writes colleague Claire Duffy.For example, what if an innocent tweet went viral and was edited to contain harassment or misinformation? tried I know how unlikely this scenario is for a tweet to go viral. By the way…)

To avoid possible misinformation, Twitter said a tweet can be edited “several times” for up to 30 minutes after it was first posted. Edited Tweets are displayed with an icon, label and timestamp to let you know that they have been changed. Users can view past versions by clicking on the “edit history” of a Tweet.

good idea. To keep abreast of this trend, starting next week, Nightcap subscribers will receive a version of the newsletter. You can read all my terrible jokes and discarded takes in this version. I circulate daily to reveal this not-yet-perfect. -Always a typo-free product. (Just kidding, of course. I would never expose you to such torturous sausage-making content.)

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