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TTU’s Dean Tom Payne: Positive News From Recent Fed Decisions

/ The Upper Cumberland's News Leader
TTU’s Dean Tom Payne: Positive News From Recent Fed Decisions

The Federal Reserve decided to pause interest rate hikes Wednesday, the first time it has done so over the last ten times it has met.

Tennessee Tech College of Business Dean Tom Payne said that indicates the Fed’s desire to prevent accidentally overtightening. He said as the nation approaches a year under historic inflation conditions, the Fed is only just now seeing the lagged effects of when it first began rate hikes to curb inflation.

“I think they’ll take this pause and possibly another one before they make any further changes,” Payne said. “One thing they would prefer not to do is raise these rates and then turn around due to an economic slowdown and have to decrease them again.”

Payne said recent federal data indicates the Producer Price Index and Consumer Price Index are showing positive signs of slowing down. He said the Fed will continue to monitor consumer confidence and consumer spending to make sure the economy does not slow too much.

“Consumer confidence right now is low and the consumer is not very confident, but they’ve continued to spend and consumer spending is about 70 percent of our economy,” Payne said. “So could it be the lagged effect that low consumer confidence generally leads to a reduction in spending which could cause an economic slowdown, so the Fed is very aware of that as well. And there are other indicators out that there the possibility of a recession looming over the next two to three quarters so that’s what they’re trading off.”

Payne said the Fed has a goal of keeping inflation at around two percent. He said they project this will continue to come down slowly and the rate at which it comes down will be “painfully slow” because as it gets closer to that two percent, it will be harder and harder to keep down.

“But what does that mean for people? Well, if the paycheck isn’t keeping up with the inflation rate basically that means our real incomes are going down,” Payne said. “Now the good news for workers is that wages have started to respond to these increases in inflation and the tight labor market has caused wages to go up, but if they don’t increase at the rate of inflation, then that income does not go as far as it used to.”


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