Hiking the last mile on inflation

The Indicator from Planet Money

NPR

Business

4.7 • 9.2K Ratings

🗓️ 26 July 2023

⏱️ 9 minutes

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Summary

The Federal Reserve finds itself in a tricky spot with inflation just a notch above its target of 2%. This poses a challenge for the central bank as they enter what's known as the "last mile" of monetary policy. Today, we explain why the final stretch of the Fed's race to 2% inflation is considered the hardest.

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Transcript

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0:00.0	NPR.
0:12.2	This is the indicator from Planet Money, I'm Whalen Wong.
0:14.9	And I'm Paddy Hirsch.
0:16.2	The Federal Reserve Open Market Committee met today an increased interest rates by a quarter
0:21.2	percent.
0:22.2	That no one was particularly surprised by this.
0:24.9	Inflation fell to 3 percent in June, which is good, but it's still not good enough for
0:29.3	the Fed to put all its tools back in the box and head home for dinner.
0:33.2	That's because, as all loyal indicator listeners know, the Fed's target inflation rate is
0:39.0	2 percent.
0:40.5	2 percent is that Goldilocks number that the Fed has decided means the US economy is running
0:45.6	not too hot and not too cold.
0:48.0	Just right.
0:49.0	Yes, it means that the value of the work that we do and the products that we make is rising
0:52.6	over time, but the price of stuff isn't going up so fast that it causes real pain in
0:57.3	the pocketbook of the American consumer.
0:59.8	But after a gut-wrenching run-up and inflation over the last couple of years, things are
1:03.8	easing off.
1:04.8	Today, Jerome Powell said that staff at the Fed are no longer forecasting a recession.
1:09.5	And you know, Paddy, inflation is down to 3 percent.
1:13.0	We're almost there.
1:14.0	We're nearly there, nearly, nearly.
	...

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