No one has to tell anyone who shops for groceries or pays the rent that inflation is out of whack. But everyone is listening these days to how officials at the Federal Reserve describe inflation, searching for clues for just how much higher the Fed could drive interest rates.
Federal Reserve Governor Lisa D. Cook, who previously taught economics and international relations at Michigan State University, visited Detroit Wednesday and acknowledged that "inflation remains much too high." But she stopped short of saying how far the Fed will have to go after the six rate hikes consumers and businesses saw so far in 2022. And she did not say how long the Fed would keep interest rates high and restrictive. Much, she said, will depend on the progress that's made to bring inflation down.
"But rest assured, we will keep at it until the job is done," Cook said, speaking at a Detroit Economic Club meeting held at the Masonic Temple.
This week, Fed officials appeared to be reading off one script.
Inflation remains top of mind for most consumers — and the Federal Reserve. On Monday, New York Fed President John Williams called inflation the No. 1 economic concern across the globe and noted that "those who can least afford the rise in costs for food, housing and transportation suffer the most."
On Wednesday, Fed Chair Jerome Powell said the Federal Reserve will push rates higher than previously expected and keep them there for an extended period. But he also indicated that the Fed won't try to trigger a recession with sharp rate hikes in the months ahead just to get inflation under control faster.
"Without price stability, the economy does not work for anyone," Powell said.
"We will stay the course until the job is done," Powell concluded his speech at the Brookings Institution in Washington, D.C.
The Fed next meets Dec. 13 and Dec. 14 -- and we're likely looking at the seventh rate hike for 2022.
Inflation isn't going away soon, but the Fed is also maintaining that some progress in the fight is being made and analysts say it's possible that rate hikes could slow down in the months ahead.
Cook said Wednesday that we've started to see some signs of improvement in the inflation data.
Some prices are falling, she said, including wholesale prices for used cars and prices for key manufacturing components, like plastic resin and steel. The October report on consumer prices was encouraging, she said, and indicates that "inflation pressures on businesses may be easing."
"Services, however, make up about two-thirds of consumer spending, and inflation in that sector has not yet slowed," Cook said.
"Notably, inflation in housing costs shot up this year and will likely contribute substantially to overall inflation for some time."
Cook's remarks in Detroit gave a clear clue that higher interest rates and the fight against inflation aren't over yet. She referred to inflation as being "unacceptably high."
And she said inflation must be the Fed's "primary focus."
And she expressed some concerns that "growth in labor costs remains well above pre-pandemic rates."
Referring to remarks made by the Fed's policy committee in November, she said the Fed anticipates "ongoing increases."
In her remarks, Cook noted that prices for services overall have accelerated sharply this year and may prove to be a persistent factor keeping inflation elevated.
"Demand for services continues to recover from its pandemic lows, with the release of pent-up demand for travel evident to anyone who has spent much time in DTW and other airports recently," she told the audience.
The big question from the audience Wednesday appeared to be about the likelihood of a recession. Answering several recession-related questions, she urged "caution and humility" about signals of a recession ahead.
"Luckily, we don't have one" right now, she said of economic conditions in late November.
She acknowledged that the economy faces a highly uncertain time in the post-pandemic economy. "I am used to working in highly uncertain environments," she said, indicating that she wrote her dissertation on the Russian banking environment in the 1990s.
As for the slowdown in the housing market, which some worry could fuel a recession, she said the falloff in housing is not like what the economy saw in the financial meltdown of 2008 because credit quality has been stronger.