Key inflation gauge accelerated to 6.8% in June
the economy still maintains pockets of strength and isn’t yet in a downturn.
Still, Powell stressed that the Fed’s policymakers regard the fight against inflation to be their top priority. He gave no hint that a weakening economy would cause the Fed to slow or reverse its rate hikes this year or early next year if inflation remained high.By raising borrowing rates, the Fed makes it costlier to take out a mortgage or an auto or business loan. The goal is for consumers and businesses to borrow, spend and hire less, thereby cooling the economy and slowing inflation.
During the April-June quarter, U.S. consumers increased their spending, even after adjusting for inflation. But the figure amounted to a meager 1% annual gain, down from 1.8% in the January-March period. Biden also welcomed an agreement forged by Senate Democrats on a slimmed-down version of his Build Back Better legislation, which many economists say could slow inflation over time. The bill would cut the government’s budget deficit, which restrains inflation by reducing overall demand. It would also reduce expenses for seniors by authorizing Medicare to negotiate the prices of some drugs.
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