The Fed's Messaging Dilemma : Planet Money Right now the economy looks good, but inflation is lower than the Federal Reserve would like. A future rate cut could juice prices, but the messaging has to be right.
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The Fed's Messaging Dilemma

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The Fed's Messaging Dilemma

The Fed's Messaging Dilemma

The Fed's Messaging Dilemma

  • <iframe src="https://www.npr.org/player/embed/719179190/730089547" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

Federal Reserve Chair Jerome Powell is always careful about the words he uses, but he has to be extra careful right now. That's because the economy is in an unusual place: the jobless rate is down and wages are rising, but inflation is lower than it should be. This might be a blip, but if the situation persists, the Fed will likely cut interest rates, to try and push inflation up to its two percent target.

A move like this would require careful messaging by Chair Powell. That's because a rate cut amounts to a stimulus, and many people will ask why the economy needs a boost when it's already humming along just fine. If Powell can't find the right language to explain the Fed's moves, people might draw a number of conclusions, from assuming that the Fed has capitulated to the President's whims, to predicting that the economy is in trouble.

Chairman Powell will have to choose his words wisely in the next few months.

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