After pausing interest rate hikes a month ago, the Federal Reserve last week increased interest rates by a quarter of a percentage point, according to NPR News.
In an interview with Talk Business & Politics, Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas Walton College of Business, said the rate increases from the Federal Reserve have played a role in slowing inflation.
“We can look at all the inflation indicators that we’ve gotten so far and say that the Federal Reserve has mostly succeeded in their goal to cool inflation,” he said. “The most recent indicator we have for June this year indicates inflation grew 3%. From June of last year, it peaked in the summer of last year with inflation numbers close to 10%.”
At a press conference last week, Federal Reserve Chairman Jerome Powell said it is too early to declare a victory over inflation.
Despite the interest rate increases intended to slow down the economy, the U.S economy grew by nearly 2.4% in the latest quarter, which was above expectations by economists, according to the Associated Press. Jebaraj said the economy’s growth was a result of domestic activity and not an increase in exports.
“It really was driven by consumer spending, business investment and some government spending as well. Consumers continue to be the bedrock of the economy, in spite of everything the Federal Reserve has done to cool the economy,” he said.
Jebaraj said the increase in construction is another reason why the economy grew. He said federal laws that were signed into law by President Joe Biden like the Inflation Reduction Act, Infrastructure Investment and Jobs Act and the CHIPS and Science Act lead companies to build new factories.
“This progress wasn’t inevitable or accidental,’’ Biden said in a statement to the Associated Press. “It is Bidenomics in action.’’
Jebaraj said that the factories being built as a result of federal law are being built near cities like Dallas, Kansas City and Boston. He said none have been in Arkansas.
