Frank Hawkins Kenan Institute of Private Enterprise
Kenan-Flagler Business School

federal reserve

Congress

Inflation Reduction in Name Only, but Still a Big Deal

Sep 28, 2022 • Commentary

It is probably not a mystery to even the most casual observer of political affairs why the historic climate, health care and tax bill signed earlier this month was dubbed the Inflation Reduction Act. Inflation is high and causing real problems for many households, and so if only Congress could legislate it away by enacting … This is not to say that the package does not deserve any enthusiasm; it is an impressive legislative feat, making significant, though imperfect, advances on health care and climate change. On the other hand, the effect it will have on inflation, its raison d’être in name, will be modest at best and occur only over time.
Labor Shortage

Barron’s: Five Reasons People Are Starting To Work Again

Sep 2, 2022 • News & Media

Labor force participation rose in July and again in August, providing the Federal Reserve a victory in its efforts to boost participation rates closer to pre-pandemic levels, Barron’s reports. Rising prices may be sending some people back to the job market, Chief Economist Gerald Cohen told the publication. “There are help wanted signs everywhere and so you can get to the point where [people] are saying, look there are opportunities out there and let me go take advantage of them,” he said.
US Economy

Why a Shrinking Economy Won’t Make the Fed Blink

Jul 29, 2022 • Commentary

GDP, the broadest measure of economic output, contracted for the second straight quarter, stoking fears that the economy is already in a recession — and has been since the beginning of the year. But the guts of the GDP report coupled with continued strong job growth and decent consumer spending suggest that the expansion remains on track. While the official arbiters of recessions are likely to agree with me — they don’t look at GDP but rather measures like job creation — what really matters to households and businesses is whether their spending power or foot traffic is drying up.
American-grocery-store-inflation

The Drop in Consumer Confidence Indexes Tells a Nuanced Story – Let’s Not Overreact to It

Jul 8, 2022 • Commentary

UNC Kenan-Flagler Business School Professor Camelia Kuhnen is an expert in corporate finance, behavioral finance and neuroeconomics, the application of neuroscience tools and methods to economic research. As many question whether a recession is on the way, she answers some questions about how the most notable consumer confidence surveys differ and whether Americans are prone to economic gloominess.
The Federal Reserve Building In Washington DC, USA

Can the Fed Brake Inflation (Expectations) Without Breaking the Economy?

Jun 16, 2022 • Commentary

The Fed tried to show its inflation-fighting mettle by raising the federal funds rate, the short-term interest rate it directly controls, by 0.75 of a percentage point. This is the largest increase since 1994, though the funds rate remains at a quite low 1.625%, especially relative to the 8.6% inflation reading last week. The Fed seemed to be spooked by the inflation print — which, rather than declining as many forecasters (including myself) expected, rose to its highest level since 1981. More important, in my opinion, longer-term measures of consumer inflation expectations and uncertainty increased.
Inflation, Uncertainty Has Shoppers Doing What They Can to Save Money

Inflation, Uncertainty Has Shoppers Doing What They Can to Save Money

Jun 11, 2022 • News & Media

Higher prices for gas, groceries and nearly everything else are on consumers’ minds after a government report Friday showing that inflation is up 8.6% on a year-over-year basis, the largest jump since late 1981. Chief Economist Gerald Cohen tells WTVD-TV, “When people start saying, ‘I think inflation is going to continue to occur, that means that the Fed has to work harder and that it could end badly.”
Finances

Should we worry about a wage-price spiral?

Feb 16, 2022 • Commentary

The jumps in the inflation rate over the last few months have been larger and longer-lasting than expected.  For much of 2022 economic forecasters, including those at the Federal Reserve, assumed that higher inflation rates would be short-lived—or “transitory” using the preferred jargon of the day. Inflation was expected to start shifting back towards the Fed’s 2% target as supply-chain bottlenecks were resolved and a pandemic-induced shift in demand for consumer goods swung back toward consumer services.  Instead, recent inflation prints have set 40-year records and we are seeing more discussion about the possibility of a “wage-price” spiral. 
Earth - Climate Change

Climate mitigation is an imperative, but it’s not part of the Fed mandate. Nor should it be.

Feb 7, 2022 • Commentary

As part of President Joe Biden’s efforts to refocus the Federal Reserve Board, the Senate conducted confirmation hearings for several nominees this past week. While these hearings traditionally raise spirited exchanges about the nominees’ views on monetary policy and bank supervision, a new and more controversial topic involves the extent to which the Federal Reserve should internalize climate risks into its purview. Before wading into central bank wonkishness, it is important to make clear that climate change represents a serious risk to not only the U.S. economy but to humanity itself. Nevertheless, we need to be very deliberate in the assessment of the available policy tools, with an eye to where unintended consequences may reside.