The US Fed's governor 'Christopher Waller' has passed a comment about the recent economic situation and the labor market. According to Waller, a drop in US inflation will not harm the country's labor market at all.
In other words, the US central bank can continue its current policy without giving much thought to the labor market. In fact, recent data suggests the US labor market is highly resilient.
However, he also warned that the public's perception of inflation would also play a key role in the Fed's policy. If the public believes that everyday item prices will keep rising, then it would become difficult to bring down inflation using the current policy.
This could make the Fed introduce dramatic rate hikes, which can lead to a slowdown in the economy. And a direct result of these policy measures will lead to major job losses across the USA.
However, if the rise in inflation is associated with the price reset frequency of businesses, then taming the inflation wouldn't be a problem.
According to Christopher Waller, there's evidence that inflation will be brought under control without an increase in unemployment.
He also pointed out that the recent data coming from the USA supports this theory. However, he also gave a hint on how future economic data will provide more clarity on the real reason behind high inflation in the country.
There's no doubt that an increase in interest rates is slowing the US economy down. However, what's strange is the strength shown by the US labor market despite the rate hikes from Fed during the last few years.
If the strength in the labor market is due to economic cycles, then it would mean a downturn is just around the corner. But as the Fed officials are saying, more data is needed to get clarity on the current economic situation of the USA.