Highlights
“The Federal Reserve warned that tightening monetary policy to curb inflation—namely, tapering its highly effective bond-buying program and beginning a series of interest rate hikes—would also constrain economic growth.”
Summary
In the 1st quarter of 2022, searing inflation, sky-high COVID-19 case counts from the extremely contagious Omicron variant, and a Russian war in Ukraine all took their toll on the U.S. economy. A gaping trade deficit and government spending pullbacks sent the value of national output into retreat for the first time since the pandemic’s initial economic wallop.
Counteracting powerful inflationary pressures without reversing the economic recovery continues to be a main challenge for the U.S. and globally. Supply chains across the globe remain encumbered. The Russian invasion of Ukraine shocked energy markets by provoking a U.S. embargo on Russian oil that sent gasoline prices over $4.00 for the first time since 2008. Consumer demand has thus far remained strong despite price pressures throughout the value chain being passed on to consumers; however, more than half of consumers now expect their financial situations to worsen over the coming year. The Federal Reserve warned that tightening monetary policy to curb inflation—namely, tapering its highly effective bond-buying program and beginning a series of interest rate hikes—would also constrain economic growth.