MARY LOUISE KELLY, HOST:
The nation's top fighter of inflation offered a progress report on that campaign today. Federal Reserve Chairman Jerome Powell signaled the central bank may opt for a smaller jump in interest rates next month. That news sent the stock market soaring. Powell cautioned, however, there's still a long way to go to bring prices under control.
NPR chief economics correspondent Scott Horsley joins us. And, Scott, that term progress report, that is what Jerome Powell himself is calling it. So what kind of progress is being made against inflation?
SCOTT HORSLEY, BYLINE: Mary Louise, there are some encouraging signs. The price of some goods has started to come down. Housing costs are still climbing. But Powell sees evidence that that could start to ease next year. The biggest concern for the Fed right now is that inflation has widened out into a lot of services which are a big part of the economy, everything from haircuts to hospitality. And the cost of services is largely driven by wages. So the Fed really wants to see more cooling in the job market, more of a slowdown in wage growth. And the central bank's trying to engineer that by raising interest rates at the fastest pace in decades.
Now, Powell did suggest today that when policymakers meet in a couple weeks, they might raise interest rates by only half a percentage point rather than the three-quarter-point rate hike they've ordered at their last four meetings. And that was enough to trigger a big rally on Wall Street. The Dow jumped more than 700 points today. But Powell cautioned interest rates are likely to keep climbing and stay up until there's clear evidence that inflation is under control.
KELLY: And what kind of effect are we seeing on the economy of all this, of the rates that are, as you say, climbing and likely to continue climbing?
HORSLEY: Yeah, they're definitely weighing on some part of the economy, especially things like housing. Both home sales and new home construction have dropped significantly. Consumer spending's also slowed a little bit. But, you know, people are still spending money. We just saw a pretty robust kickoff to the holiday shopping season this past weekend. In a conversation today with David Wessel at the Brookings Institution, Powell said he still sees a chance the Fed can curb inflation without actually tipping the economy into a recession.
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JEROME POWELL: I do continue to believe that there's a path to a soft or soft-ish landing. I do believe that, and it's...
DAVID WESSEL: And the definition of a soft-ish landing is what? Unemployment goes up a little, but we don't have a recession?
POWELL: Yeah. Unemployment goes up, but not - it's not a hard landing. It's not a severe recession. You know, you could think of unemployment going up but not really spiking.
HORSLEY: So far, the unemployment rate has been really low, despite the Fed's aggressive rate hikes. The jobless rate in October was just 3.7%. We'll get a report on November's unemployment rate later this week.
KELLY: So just a small jump, but of course, even a small jump in unemployment is painful if you're one of the people who's lost your job. Is the Fed getting pushback about that?
HORSLEY: Yeah, a little bit. It's still pretty muted because, for now at least, inflation is still seen as the more urgent problem. But you are starting to hear some grumbling from lawmakers and others on the left who worry the Fed is not paying enough attention to the workers, especially lower income workers, Black and brown workers who could find themselves on the chopping block. Massachusetts Senator Elizabeth Warren confronted the Fed chairman about that during a hearing this past summer.
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ELIZABETH WARREN: You know what's worse than high inflation and low unemployment? It's high inflation and a recession with millions of people out of work. And I hope you'll reconsider that before you drive this economy off a cliff.
HORSLEY: By law, of course, the Fed is supposed to promote both maximum employment and stable prices. Powell insists he and his colleagues are not ignoring either side of that ledger. He just argued today that if you want a healthy job market over the long haul, then you've got to get control over inflation.
KELLY: Thank you, Scott.
HORSLEY: You're welcome.
KELLY: NPR's Scott Horsley. Transcript provided by NPR, Copyright NPR.
