New analysis assesses the Federal Reserve's inflation 'remedy' while emphasizing who it will really 'cause pain' for

At a time when inflation is at an all-time high and gas prices are soaring, the Federal Reserve has announced its plan to hike interest rates yet again as part of its latest attempt to slow the acceleration of inflation. When Federal Reserve chairman Jerome Powell made the announcement earlier this week, he made it clear that "there will be pain." However, he did not specify who would suffer.

Now, a new analysis published by The Guardian is breaking down this inflation "remedy." In the piece, Clara Mattei —an assistant Professor of economics at the New School for Social Research— explains what the remedy really means as she identifies who will actually be affected by it. She also emphasized the importance of what Powell did not say.

"What Powell does not say is that the 'pain' for working-class Americans is not an accident or even an unintended consequence," Mattei wrote. "As economists well know, the very possibility of tackling inflation rests on relieving the upward pressure on prices by diminishing consumer demand. To do so, the Fed will curtail the purchasing power of most citizens – especially those who have the least."

Although the interest hike is framed as a "shared-short-term sacrifice" Mattei notes that the increase will disproportionately impact working-class Americans.

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"While the narratives from Powell and others imply that our shared short-term sacrifice will produce shared long-term gains, their careful framing is intended to mask a deeply unpleasant reality: neither the sacrifice nor the gains are shared," Mattei wrote. "Easing inflation will disproportionately harm working-class people, and these same people will reap none of the benefits down the road."

She also explained what Powell's message suggests in regard to American workers. "The implicit message of Powell and fellow economic experts is that workers have had it too good in the post-pandemic recovery. In his finessed technical wording, 'The labor market has continued to strengthen and is extremely tight," she wrote.

According to Mattei, the true purpose is to restore the economic class structure by depicting the issue of inflation as the real public enemy. "By portraying inflation as a shared public enemy whose defeat will deliver a shared public benefit, Powell’s Fed aims in part to restore class structures that decrease consumption, especially among the working and middle classes, and increase the productivity of these same classes. To do so, Powell draws on economists’ longstanding narratives of shared sacrifice, while knowing that the reality will be anything but."