On May 18, according to a new study by the Federal Reserve Bank of New York, U.S. inflation is slowing as interest rates rise and financial conditions tighten, but the risks of decelerating economic growth and rising unemployment remain high.
In an article published Wednesday, researchers at the New York Fed unveiled a new dashboard that reflects changes in the economic outlook and financial conditions and compares them with previous monetary policy cycles.
The indicators point to a sharp rise in inflation risks in the six months leading up to the Fed’s move to raise rates.
After successive interest rate hikes, these risks began to decline sharply after stabilizing last year, but they are still relatively high compared to previous levels.
Still, the researchers consider the improvement to be significant. Unemployment rose sharply last year, but it was a pleasant surprise that the risk started to abate in 2023, the researchers said.
“This is unusual relative to the previous four tightening cycles, where the probability of rising unemployment is usually relatively stable during policy tightening,” the researchers wrote.