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The US Federal Reserve on Employment and Inflation


The US Federal Reserve has been trying to maintain healthy employment and inflation rates, yet the recent global events have caused some damage to the global economy. The inflation and the unemployment rate are two of the main factors that suffered due to the political, social, and economic fluctuations. The COVID-19 outbreak and the subsequent lockdown have caused multiple companies to either go out of business or significantly decrease their production. Since the production went down or stopped altogether, people lost their jobs, and the businesses were not able to be as proficient in providing services or manufacturing products as they used to be before the pandemic. However, the situation is becoming more favorable due to the mass vaccination programs. The virus is less of a threat, which is why organizations are able to employ more people and operate on the same level as a couple of years ago. However, since individuals are becoming more financially able to purchase products and companies are more efficient when it comes to production, inflation started to rise and subsequently reached high levels.

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The US Federal Reserve has put out a statement on maximizing employment and keeping their interest rates low in order for banks to be encouraged to borrow money. A low-interest rate means more companies and individuals will be able to take loans for a favorable price, invest them, and contribute to a more stable economic situation in the country. However, as inflation has exceeded the standard, the US Federal Reserve has not increased the interest rates. The banking system board argues that until a more stable situation on the market occurs, the rates will remain stagnant. This paper analyzes the statement, how it affects the economy, why the general public criticizes it, and what the future looks like in relation to the Federal Reserve board’s aim if slight strategic changes are made.

Federal Reserve Board Statement

Inflation and employment are two economic factors that the Federal Reserve tries to control and keep at an optimal level. The board specifically stated that the banking system would use all the necessary measures to maximize the rate of employment and promote price stability (US Federal Reserve, 2021). The press release mentions these issues because they reflect the current situation related to the pandemic that has resulted in losses of jobs, low production, and initially low inflation. The short-term impacts are illustrated in the present conditions: fewer employed individuals, reduced investments, less revenue from exporting products, etc. However, there are specific medium and long-term effects that need to be addressed. High inflation for an unknown period of time, unstable prices, and a state of recovery in the economic realm are some of the adverse consequences. On the other hand, the development of e-commerce and improvements in the digitalization domain may also be attributed to the lockdown. The board’s aim is to mitigate the adverse short and long-term effects by contributing to a more stable yet promising economic situation.


While the general public understands the importance of maximizing employment and controlling a stable inflation rate, the US Federal Reserve has faced criticism for keeping the interest rates and not tapering them sooner. Moreover, the board members have faced criticism for not taking certain factors into consideration. One example is the employment rate, which is only half percent higher compared to the lowest number (Cox, 2021a). This was less than the Federal Reserve predicted, and there seems to be a disparity between the travel and leisure industry compared to other domains such as retail. Moreover, it is not known on when the Federal Reserve will reduce asset purchases (Cox, 2021b). Such uncertainty makes the public to believe that the banking system members do not clearly understand how the economy will progress or regress in the near future.

Another criticism that doubts the Fed’s planning strategic implementations is the lack of perspective. No one was expecting the inflation to rise so quickly, and Federal Reserve board members were sure the rate would get high eventually but not as quickly. This is why they have kept the interest rates low for so long, thinking that inflation will slowly stabilize over time. Now that the inflation is higher than everyone expected, the Federal Reserve is thinking of mitigating these problems and promises stable prices by 2023 (Cox, 2011b). The past prognosis happened to be false, which creates a lack of trust that the public is expressing through criticism.

Inflation and Employment

As mentioned before, the purpose of this paper is to analyze the issues that emerged due to the COVID-19 pandemic, specifically the high unemployment rate and unstable inflation.

Inflation and Employment
Figure 1.

Figure 1 illustrates how the previously low levels have significantly shifted. The low production and lack of resources caused inflation to reach deficient levels (Statista, 2021b). However, as all the industries have experienced development after some of the effects of the virus were mitigated, consumers had more opportunities to contribute to the economy by investing and purchasing. Businesses started reaching the production levels they had before, which also resulted in an increase in the rate of inflation. As stated before, the Federal Reserve was expecting the percentage to rise. However, it became higher than everyone had predicted, which has caused instability on the market. The Federal Reserve can manage the high inflation by raising the interest rate and tapering. The board agrees that by 2023, the tampering move will be put in place (Pound, 2021). This means that the US Federal Reserve will start buying fewer assets and slowly remove the financial stimulus. Moreover, there will be an increase in the interest rate, yet no statements suggest when this will happen. The Federal Reserve is going to wait until the economy is more stable and the unemployment rate is lower to make the aforementioned changes.

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Inflation and Employment
Figure 2.

The number of vacancies is increasing as the effects of the lockdown are slowly being mitigated. Figure 2 illustrates the high rates of discharges and layoffs in 2020 and a gradual increase in the following period (Statista, 2021a). The statistics show an improvement, yet the Federal Reserve was expecting the rate to be much higher by the present time. The unemployment situation is slowly improving, and it will continue to decrease as more businesses manage to return to the pre-pandemic production rate.


The US Federal Reserve is the central system that controls such important economic aspects as inflation and employment. According to researchers, the recent pandemic has shown how essential it is in terms of the global financial situation (Bradlow & Park, 2020). The banking system is certainly willing to stabilize the situation yet does not address specific issues that may impact the economy and lead to adverse outcomes. The board did not address the new threats of the Delta variant. While vaccination decreases the risk of getting infected, the mutated virus may still impose specific difficulties. This means that the employment rate will not grow as quickly as predicted, and inflation will remain unstable for a more extended period of time (Cox, 2011b). A recommendation would be to consider all the risks before promising to temper and increase interest rates by 2023. The board mentioned implementing the changes when the economy stabilizes, yet there are now aspects that may cause the situation to be prolonged. It is important to consider all the possible risks before starting a policy that may not be effective under the present situation to have a clear vision and a transparent plan for future improvements.


The US Federal Reserve uses all the necessary measures to improve the rate of employment and stabilize inflation. It has decreased interest rates and continues purchasing assets to provide stimulus and contribute to economic growth. While their aim to increase the rate of inflation to above 2% has been reached, the new issue is the elevated rates that have risen too much compared to what was initially planned. Moreover, while the rate of employment is growing, it is not as drastic as the board has predicted. The Federal Reserve lacks consideration when it comes to the new possible risks, such as the Delta variant. Considering such possibly risky aspects while promoting economic growth will be an excellent escape from the drastic changes that occurred because of the COVID-19 lockdown.


Bradlow, D. D., & Park, S. K. (2020). A Global Leviathan emerges: The Federal Reserve, COVID-19, and international law. American journal of international law, 114(4), 657–665. Web.

Cox, J. (2021a). Inflation speeds up in April as consumer prices leap 4.2%, fastest since 2008. CNBC. Web.

Cox, J. (2021b). Federal Reserve holds interest rates steady, says tapering of bond buying coming ‘soon’. CNBC. Web.

Pound, J. (2021). Full recap and analysis of Fed Decision: Powell’s market-moving comments, when the taper is coming. CNBC. Web.

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Statista. (2021a). U.S. job openings hit record high as workers quit in droves [Infographic]. Web.

Statista. (2021b). United States – monthly inflation rate in August 2021 [Infographic]. Web.

US Federal Reserve. (2021). Federal Reserve issues FOMC statement. Web.

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