Statement | Economic Growth

News from EPI With today’s rate hike, Fed signals they will tolerate excess unemployment

Today’s decision by the Federal Reserve to raise interest rates another 0.25 percent is a mistake. The point of raising rates should be to slow an economy that has been growing too fast—putting too much downward pressure on unemployment and empowering workers to demand and achieve wage gains in excess of productivity. This does not describe today’s economy. Wage growth remains subdued relative to the Fed’s price inflation target, and there has not been an episode of rapid wage growth pushing inflation out of the Fed’s target zone in literally decades. The failure to prioritize the achievement of genuine full employment is one of the most glaring policy failures of recent decades, one which has kept wage growth so disappointing for the vast majority of American workers. The Fed deserves much praise for its response to the Great Recession and its efforts to spur recovery after, but today it seems to be regrettably backsliding by tolerating excess unemployment that will sap workers’ ability to achieve wage gains in coming years.


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