Lacalle: The Fed Caused High Inflation And The Current Jobs Slump
Tuesday, Sep 09, 2025 - 06:05 AM
Authored by Daniel Lacalle,
Both the recent spike in inflation and the current decline in US jobs are, in a very significant way, the fault of the Federal Reserve.
The Fed’s policies since 2021 reveal a nightmare “pendulum” effect: first, easy money and historic liquidity expansion fueled runaway inflation; then, rapid rate hikes hurt businesses and families as well as job creation, especially for small and medium-sized businesses and families.
In 2021, the largest monetary expansion in decades caused an inflationary burst that was particularly negative for wage earners and small businesses. A massive rate hike exacerbated this negative impact.
The August jobs report exposes the Fed’s failure to balance its mandate. The Federal Reserve did not seem to read their own beige book that warned of a widespread job market weakness for months.
The Federal Reserve’s Beige Book first alerted of a weak job market in April 2025 and continued to highlight the labor market challenges in May and June. The April Beige Book signalled flat economic activity and slow labor demand and highlighted weakness for new entrants such as graduates, with some regions noting slight declines in employment and business activity. However, despite the evident negative impact of high rates, the Fed decided to keep interest rates unchanged even when inflationary pressures proved to be nonexistent. Between April and July, CPI inflation and core CPI monthly figures showed no inflationary pressures from tariffs.
more:
https://www.zerohedge.com/economics/lacalle-fed-caused-high-inflation-and-current-jobs-slump