Norges Bank surprises and hikes 50bps
Thank you to the Massachusetts Bankers Association for the opportunity to speak to you today. It is often good to get away from Washington to gain some perspective, and it’s always worthwhile for me when I can get some perspective from bankers. I will touch on some of the banking issues I expect are on your minds, but one of the biggest issues for everyone right now is inflation, what the Fed is doing to get inflation under control, and the implications for your businesses, your customers, and your communities. Inflation is the highest we have seen in the United States in 40 years and so far it shows little sign of moderating. At the same time, the economy is growing at a moderate pace, and the labor market is extremely tight, as indicated by a variety of measures including reports of many employers unable to find workers despite significantly raising wages. That tightness is contributing to inflation, because labor is the largest input cost for producing goods and providing services. Inflation is a significant challenge for everyone, but it hits lower- and moderate-income people the hardest, since they spend a larger share of their incomes on necessities and often have less savings to fall back on. Inflation is also a burden for businesses that must somehow balance unpredictable costs while setting prices that aren’t so high that they discourage customers from purchasing. Inflation that continues at these levels is a threat to sustained employment growth and to the overall health of the economy. The inflation data show that, afte tweet at 11:00am: FED’S BOWMAN: ANOTHER 75 BPS RATE HIKE WILL BE APPROPRIATE IN JULY, AND HIKES OF AT LEAST 50 BPS AT NEXT FEW SUBSEQUENT MEETINGS.
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