WHAT'S FAITH GOT TO DO WITH THE FED?

Undoubtedly, there’ll be a lot going on this upcoming week. On the economic front, though, there’s two things to keep your eyes open for— the release of the Bureau of Labor Statistics’ (BLS) report on the Consumer Price Index and whether the Federal Reserve’s Federal Open Market Committee (FOMC) will bring the year to a close with yet another increase in its benchmark interest rate.

The CPI report, which provides info on the most well-known metric of inflation, will hit the media early December 13th. The last report was released was released on November 10th, 2022, and the CPI came in at 7.7%. The FOMC meeting takes place on December 13th-14th and within hours we’ll know whether the FED has decided to continue its strategy of hiking the interest rate in an effort to drive inflation down to its goal of 2% per annum. At its last meeting in November, the FOMC raised its benchmark interest rate by another 75 basis points (3/4 of one percent). The betting money is on the Fed raising the interest rate by at least 50 basis points, and maybe even as high as 75 basis points, when they gather in the next few days.

In this post I do something that I haven’t done too often thus far: I blog here not only as a professional economist but, equally important, as someone with a graduate degree in theological ethics.

As such, here’s what I’m aiming for: I want to offer up a moral principle that can be aid in the process of thinking through—and responding— to economic policy proposals. More pointedly, I want to bring that principle to the foreground and illustrate, albeit briefly, how it can be used a prism through which to refract this week’s upcoming CPI report and to assess the FOMC’s current strategy of trying to quash inflation via the raising of the interest rate.

UPPING THE DOSAGE

The popular wisdom is that prices are popping because the labor market is too juiced up, and that the best way to tamp down inflation is to cool the economy down. The economy, according to this view, is akin to a feverish patient whose temperature is best broken by administering increased dosages of the Fed’s benchmark interest rate.

Raising the interest rate makes it more expensive to borrow and spend and this, in turn, chokes off what the dominant narrative deems to be the patient’s underlying problem— excessive aggregate demand.

Since May 25th, the FOMC has been upping the medication. On that date it increased its benchmark interest rate by 25 basis points (1/4 of a percentage point). That was followed by a 50 basis point hike on May 5th. And that 50 basis points increase was then followed by four consecutive dosage increases of 75 basis points (3/4 of a percentage point)—June 16th, July 27th, September 26th, and November 2nd.

As mentioned earlier, it’s expected that at its December meeting, the Fed will announce another rate increase, probably somewhere in the 50-75 basis points range.

PROMOTING AND PROTECTING THE WELL-BEING OF THE LEAST OF THESE

The world’s major religions tend to pay particular attention to the plight of the marginalized and to the interdependence that characterizes existence. Christian theological Obery Hendricks, for instance, argues that as creations of the Divine, human needs— the stuff we need to survive and thrive as individuals embedded within communities— ought to be treated as holy.

Economist and Buddhist, Clair Brown, lifts up, among other things, the interdependence that exist between ourselves and nature, and the moral imperative to reduce individual and collective suffering. Persons are regarded as sacred, with each one of us having our own inner Buddha. For Brown, economic policies ought to be morally assessed by the degree to which they minimizes suffering.

But what in the world, you might be thinking, does this have to do with the Fed’s strategy of pouring water on inflationary fires by upping its benchmark interest rate?

What in the world, you might be thinking, does the Fed have to do with faith?

Why ought communities of faith ought to have interest in interest rate movements?

They ought to have an interest because the Fed’s interest rate hikes can impact the degree of human suffering.

They—communities of faith— ought to have an interest because interest rate hikes can impact the extent to which basic human needs are being met.

The Fed’s strategy possess the capacity to initiate a recession and increase joblessness. To the extent that that happens, then, human suffering is increased, and the basic fulfilment of human needs is increasingly jeopardized.

What’s more, history tells us that this suffering and lack of need fulfilment is likely to hit the economically marginalized disproportionately hard.

WRAPPING UP

So, here’s the long and short of it: Communities of faith have the power to use their moral authority to help ensure the presence of something that’s vital but too easily forgotten— namely, the urgent need to never forget the importance of subjecting economic policies to a moral assessment.

More pointedly, faith communities can play a role in keeping before us the importance of evaluating the impact of various proposals on our collective well-being; they—communities of faith— can partner with others of good will to remind us that, ultimately, good policies contribute to the meeting of human needs and the minimization of suffering.

Good policies—policies that deserve our support— are those that promote and protect the dignity of all, with particular attention being paid to the likely impact of policies on the status of the marginalized.

Within the next 48 hours or so—and as mentioned earlier— the Federal Reserve’s Federal Open Market Committee (FOMC) will announce its next move in regarding efforts to put a lid on inflation and drive it back toward its goal of 2% per annum.

We’ll hear the voice of the Fed, no doubt. We’ll hear what the chair, Jerome Powell, has to say and, eventually, we’ll even get to peep the minutes of the meeting.

What we won’t hear is a sustained and systematic word on how the Fed’s decision is likely to impact human need and suffering.

What we won’t get is an extended word is how the decision promotes and protects human dignity.

That word, if it comes at all, will come from outside of the Fed.

It’ll come—if it comes at all— from those who have been acutely concerned with economic and racial justice.

It will come—if it comes at all— from the chorus of voices that are concerned with the potential impact of monetary policy decisions on joblessness, homelessness, and poverty.

That word—if it comes at all— will force us to face, to reckon with, whether the Fed’s decision will increase the ranks of the almost 6 million unemployed, the 38 million who live beneath the official poverty line, and the half mil who are counted as homeless.

I’m expecting that we’ll see another interest rate increase, probably somewhere in the neighborhood of 50-75 basis points.

We’ll see, right?

It’ll also be nice to hear voices of faith amongst those reminding us that, in the final analysis, we need to ask:

Does this decision promote or deny the meeting of human needs, the minimization of suffering, and the promotion and protection of the least of these?