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Inflation appears to be in retreat. However, last week’s CPI and PPI (consumer and producer) numbers showed that, while slowing, inflation is still very high. Business Outlook’s Matthew Narvaiz reports in today’s edition that Federal Reserve economist Nick Sly explains that the Fed is not satisfied with where it is — 4.2% currently — and is considering a 2% hike. There is no firm word on whether the Fed will continue to raise rates and so markets remain volatile.
After three years, Thursday was the official end of the federal Covid public health emergency. Those days are behind us now, but in many ways the terrible legacy of the epidemic remains. It touches lives, health and wallets.
He kept the economy flush with cash through a series of bailout policies, including stimulus checks. From Washington, we enacted the 2020 Corona Virus Preparedness and Response Supplemental Benefits Act through March 2021 to save America. There were other additional grants as well as state and municipal programs. Washington sent $804 billion directly to low- and moderate-income individuals and families in three rounds of stimulus payments. In case anyone is wondering where the money pumped into the economy comes from, we are talking about $5 trillion here.
Simply put, inflation boils down to too much money chasing too few goods. The other part of the equation — too few supplies — led to pandemic shutdowns and later supply chain issues — which brought us to where we are now.
The Fed can certainly argue that its policies are working, although the resilience of the labor market is a question mark. But that now marks the nicks in armor. Last week’s unemployment numbers showed an increase in new claims for unemployment benefits, so yes, the anti-inflation claim may be hitting home.
Although NM’s economy is unique, it bears repeating that the Fed’s reach affects everyone, every state and municipality, and every consumer. This is because prices influence prices and we are all buying some goods or services at any given time. There are other effects associated with interest rates, not all of them negative. For example, bond buyers get high yields, especially because of the new bond yields that make it difficult for smaller banks to survive.
In this week’s business outlook
Check out Matthew Narvaez’s current feature on the New Mexico economy. Matthews interviews three government economists who discuss the idea of an impending recession and try to clear the fog and smoke about the economy.
We need your help: We’re launching a new feature about closing, opening and moving businesses. You can help by emailing notifications about what’s happening at your business or if you happen to see a sign or turn while driving. We will check for you. Send your information to bizoutlook@abqjournal.com.
In the meantime, feel free to email me at jleacock@abqjournal.com.
See you next week.
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