(Washington) An official of the American central bank (Fed) warned on Monday of the risk of seeing unemployment rise in the United States, because of rates which remain high to bring down inflation which is still too high.
“At this point, inflation is not the only risk we face,” San Francisco Fed President Mary Daly warned in a speech at the Commonwealth Club World Affairs of California.
“So far, the labor market has adjusted slowly and the unemployment rate has increased only slightly. But we are getting closer to a point where this favorable outcome may become less likely,” she warned.
The unemployment rate rose slightly in May, to 4%, the highest since January 2022. But there was much more job creation than expected.
“At this stage, we have a good job market, but not a hot market”, and a possible “slowdown in the job market could result in an increase in unemployment”, further indicated Mary Daly, who in 2024 will have the rotating voting rights within the Fed’s decision-making committee, the FOMC.
She stressed the need to “keep an eye on both sides of our mandate – inflation and full employment.”
Because inflation remains above the 2% target.
“The irregularity of inflation data since the start of the year has not inspired confidence. […] It is difficult to know if we are really on the path to sustainable price stability,” commented the official.
After a rebound this winter, inflation started to fall again in April and May, to 3.3% over one year in May compared to 3.4% in April, according to the CPI index, on which pensions are indexed.
The PCE index, the measure favored by the Fed, remained stable in April at 2.7% year-on-year. May figures will be released on Friday.
