When the Federal Reserve board hiked interest rates by another three-quarters of a point this week, the move was widely applauded by the business press. The rate hike showed the Fed’s commitment to fighting inflation.
While this is arguably true, it also showed the Fed’s willingness to make the most disadvantaged groups pay the price for slowing a burst of inflation that they did not cause. In effect, Black people, Hispanic people, people with less education and people with criminal records are being forced to sacrifice to end a spurt of inflation caused by the pandemic and Russia’s invasion of Ukraine.
Just to cut through the euphemisms about an “overheated” economy and abstract pain, what we are talking about with the Fed’s rate hikes is throwing people out of work to put downward pressure on wages. The story is that with a slower rate of wage growth, there will be less cost pressure for companies, and therefore they can slow the pace of price increases, bringing inflation down to a more acceptable rate.
But, everyone is not equally susceptible to the unemployment…
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