Jobs Report Signals 'Immaculate Disinflation': Kroszner

The video discusses the Federal Reserve's approach to managing employment and inflation. It highlights the confusion around the Fed's desire for lower wage growth to control inflation, given that a significant portion of production costs are tied to wages. The concept of 'immaculate disinflation' is introduced, where wage growth and inflation decrease without increasing unemployment. The Fed's cautious stance on adjusting interest rates is explained, emphasizing their need to maintain credibility while testing new economic theories.

What is the primary reason the Federal Reserve is concerned about rapid wage growth?

• It increases production costs, making it hard to control inflation.

• It causes a trade deficit.

• It decreases consumer spending.

• It leads to higher unemployment.

What is unique about the current economic situation described as 'Immaculate Disinflation'?

• Wage growth and inflation are both increasing.

• Unemployment is rising while inflation is decreasing.

• Wage growth and inflation are decreasing without increasing unemployment.

• The economy is in a recession.

How does the Federal Reserve plan to respond to the current economic data?

• By decreasing interest rates.

• By focusing solely on reducing unemployment.

• By cautiously continuing to raise interest rates.

• By immediately stopping interest rate hikes.

Why is the Federal Reserve hesitant to declare victory over inflation?

• They want to focus on increasing unemployment.

• They believe inflation is no longer a threat.

• They have already achieved their goals.

• They are concerned about losing credibility if inflation rises again.

What might influence the Federal Reserve to adjust their interest rate hikes from 50 basis points to 25 basis points?

• A decrease in the trade deficit.

• A rise in consumer spending.

• A consistent decrease in wage and overall inflation rates.

• A significant increase in unemployment.