Fed Splits the Difference on Labor Market Pain
Monetary policy makers bumped up their unemployment forecasts, but they’re not ready to go full doomsday just yet.
Not ready to tap his inner Larry Summers.
Photographer: Drew Angerer/Getty Images
The Federal Reserve is inching toward acknowledging how painful its inflation fight is likely to be, but it’s still a lot closer to the optimists than the pessimists.
On a day when it raised interest rates by 0.75 percentage point to a range of 3% to 3.25%, the Fed also released economic projections showing that its median forecast for unemployment is 4.4% by the end of 2023, up from the current 3.7%, meaning more than a million fewer jobs as a result of its campaign. That marked an increase from previous projections in June that showed unemployment peaking around 4.1%, which were widely panned as unrealistic. Yet the numbers still look rosy compared with the labor-market damage that historically accompanies rounds of aggressive monetary policy tightening.