Robert Hockett

Professor of Law

“Federal Reserve Chair Jerome Powell will confirm this week what he has previously promised and what the market has already priced-in to trading: that the Federal Open Market Committee (FOMC) will be raising the policy rate by another 75 basis points.

“More interesting than this is the New York Fed's recent clarification of the Fed's policy frame – its Summary of Economic Projections – going forward, and relatedly how much ‘pain,’ as Chair Powell might put it, the central bank is willing to inflict on working people who are not responsible for current core inflation.

“As to the Summary of Economic Projections, New York Fed President John Williams has recently announced, in effect, that the FOMC's 'neutral' nominal policy rate target will be 50 basis points above expected inflation going forward. That's pretty strict.

“As for the central bank’s infliction, how 'painful' this proves will be a function, in large part, of how quickly and effectively recent productivity-enhancing legislation passed by Congress – Infrastructure, CHIPS Act, Inflation Reduction Act, etc. – will grow the number of good living-wage jobs, the kind most Americans enjoyed before the globalization binge of the 1990s and early 2000s began sending our industries overseas.

“Let us hope either that these supply-side transformations happen quickly, or that the Fed and Congress begin looking as eagerly at the record high profit component of consumer prices as they are at the far less significant wage component, which is trailing inflation rather than leading it.”