The Federal Reserve’s preferred inflation gauge eased further in December and consumer spending fell.
Washington — The Federal Reserve’s preferred inflation gauge eased further in December, and consumer spending fell — the latest evidence that the Fed’s series of interest rate hikes are slowing the economy.
The Fed has been steadily driving up borrowing rates across the economy, seeking to slow spending, growth and the surging prices that have bedeviled the nation for nearly two years. Last year, the Fed raised its benchmark rate seven times, and next week it’s set to do so again. Friday’s data may heighten concerns that the economy’s primary driver, the American consumer’s willingness to keep spending freely, is starting to crack under the weight of higher prices and interest rates.
If consumers remain less willing to boost their spending, companies’ profit margins will shrink, and many may cut expenses. That trend could lead eventually to waves of layoffs. Economists at Bank of America have forecast that the economy will grow slightly in the first three months of this year — but then shrink in the following three quarters.
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