In a press conference on May 4, Powell announced that the Fed would be raising interest rates by half a percentage and implementing policies aimed at reducing inflation in the United States, which is at its highest level in 40 years.
“Employers are having difficulties filling job openings, and wages are rising at the fastest pace in many years,” Powell complained.
The Fed’s proposed solution: bring down wages.
There are more job vacancies than there are unemployed people in the United States, as the economy recovers from the Covid-19 pandemic.
Powell claimed this discrepancy between job vacancies and unemployment is due to high wages, which discourage workers from taking bad, low-paying jobs with few benefits, and therefore give them too much power.
“Wages are running high, the highest they’ve run in quite some time,” the Fed chairman lamented.
Workers need to be disciplined by the labor market, he insisted.
Powell aims to do this by reducing wages.
“By moderating demand, we could see vacancies come down, and as a result—and they could come down fairly significantly and I think put supply and demand at least closer together than they are, and that that would give us a chance to have lower—to get inflation—to get wages down and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially. So there’s a path to that,” he said.