The Federal Reserve’s ongoing strategy to combat rapid inflation is highlighted by the Personal Consumption Expenditures Index’s marginal rise of 3.5% year-on-year in August, a slight increase from 3.4%. The core measure, which excludes volatile food and fuel costs, recorded a modest annual increase of 3.9%.
Under the leadership of Jerome H. Powell since March 2022, the Fed has been raising interest rates to slow down economic growth and prevent price surges. Currently, the interest rates are maintained between 5.25% and 5.5%, with the possibility of an additional hike within this year.
Contrary to expectations, American consumers continue to spend despite the increased borrowing costs. This is evidenced by the 0.4% rise in personal consumption expenditures in August, suggesting a potential “soft landing” for the economy.
Austan Goolsbee from the Federal Reserve Bank of Chicago remains optimistic about overcoming inflation without causing an economic downturn. His optimism is fueled by easing supply chain disruptions and stabilizing housing and car markets.
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