Energy Crisis and Mass Strikes Loom Over US Economy Amid Modest Growth - Fed
13:07 GMT 21.09.2023 (Updated: 05:30 GMT 07.10.2023)
With senior U.S. officials repeatedly claiming that there are no signs that the national economy is entering a downturn, prices at the pump in America rose to their highest levels of the year.
The US may face obstacles to achieve a "soft landing," as Federal Reserve Chairman Jerome Powell has cautioned against new risks such as the autoworkers strike and rising energy prices.
On Wednesday, he addressed the reporters and expressed concerns about possible temporary inflation spikes due to the escalating oil prices and the ongoing auto strike. Additionally, he emphasized that an impending government shutdown could potentially have a detrimental impact on economic growth.
Powell said the strike against all three Detroit automakers “could affect economic output, hiring and inflation.” According to him, “That’s going to depend on how broad it is and how long it’s sustained for.”
The Fed chief also admitted that energy prices are becoming higher, which he called “a significant thing.”
“We tend to look through short-term volatility and look at core inflation [which excludes food and energy]. But, so, the question is, how long will higher prices sustain?”, the Federal Reserve Chief said.
Powell spoke as gasoline prices in the US hit $3.88 a gallon on Monday, the highest price since October 2022. US Media reported that gas prices in America are currently 20 cents higher compared to this time last year, although the national average is still significantly lower than the record high of $5.02 a gallon in June 2022.
Following failed negotiations to increase workers' wages, last week saw over 13,000 employees from three major American automobile companies, Ford, Stellantis, and GM, embark on a strike after the United Auto Workers (UAW) initiated walkouts at all three plants.
In a separate development, US Treasury Secretary Janet Yellen warned that if Congress can't avoid a government shutdown in the next two weeks, "It could have some impact on the economy's momentum.”
With the new US fiscal year set to begin on October 1, Congress has yet to pass 12 appropriations bills that set discretionary spending levels. Lawmakers have until September 30 to pass legislation to fund the programs covered by the appropriations process or the government will shut down.