The Fed is in a very difficult position. They are dealing with an economy that is facing both a negative growth shock and an inflationary shock at the same time, and are equipped only with the blunt tool of monetary policy.
Layoffs are important, but focusing on layoffs risks missing the other part of the equation: hiring.
The Fedspeak this week is still: wait and see, and we care most about keeping inflation under control.
The Committee is still super worried about long-term inflation expectations, and everyone from Goolsbee to Kashkari say that keeping those down is the highest priority.
After the pandemic recession, the right policy decisions resulted in a strong recovery and laid the foundations for another era of sustained productivity growth, similar to the 1990s. Sadly, in 2025, new policies are actively working against that dream.
