Economic Reporting Review
June 21, 1999
By Dean Baker
Inflation and Interest Rates | Trade | Social Security | Outstanding Stories
Inflation and Interest Rates
"Is the Hot Economy Overheating?"
George Hager and Tim Smart
Washington Post, June 12, 1999, page E1
"Strong Consumer Spending Worsens Interest-Rate Jitters"
Jonathan Fuerbringer
New York Times, June 12, 1999, page B1
These articles report on concerns that the continuing strength of the economy will cause the
Federal Reserve Board to raise interest rates. Both articles present the views of several
economists who believe that the economy is too strong and that it would be desirable to slow it
down. Neither article includes any discussion of the costs of slowing the economy, specifically
slower job growth and a rising unemployment rate.
The reason that the Federal Reserve Board would deliberately raise the unemployment rate is
that a rise in the unemployment rate will place downward pressure on wages. Less rapid wage
growth will reduce inflationary pressures in the economy. Most people would probably