Central bankers hope that their policies will hold back economic growth without pushing unemployment or plunging America into recession – creating what they often call a “soft landing.”
“I really want this to be the result, but I realize it won’t be easy to do,” Rafael Bostic, president of the Atlanta Federal Reserve Bank, said in an interview Monday.
Officials have strongly acknowledged that a slight downturn will be difficult, and some have suggested they would be prepared to inflict economic pain if it were necessary to tackle high inflation.
If the economy reaches a point where unemployment starts to rise but inflation remains “unacceptably high,” Mr Bostic said, rising prices will be “a threat we need to take into account”.
One challenge for politicians – and even more so for families – is that price increases are at the forefront. Food spending rose 0.9% in April from the previous month, the 17th consecutive monthly increase, the report said on Wednesday.
The increase is due to dairy products, soft drinks and a 10.3% monthly increase in the price of eggs, as bird flu destroyed flocks of poultry. Such inflation tends to hit the poor in particular, who spend most of their budget on needs such as food and gas.
But as Americans see strong job gains and strong wage growth – though not strong enough to fully counter inflation – many have been able to absorb the rising costs so far, keeping aggregate demand strong.
“Consumers seem willing to accept higher menu prices, especially as inflation is high,” said George Holm, chief executive of food distributor and restaurant supplier Performance Food Group, during a talk on Wednesday’s earnings. “However, this is something that needs to be closely monitored over the next few months and quarters.
Anna Swanson contributed to the report.
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