The Simple Reason Slower Demand Can Be Inflationary
There are two key pillars to the Fed's inflation-fighting campaign, and they're related.
First and foremost, policy needs to curb demand, which is just a euphemism for discouraging spendthrift Americans from spending. If policy is successful in that regard, businesses won't need as many workers. Ideally, a reduction in labor demand will manifest in fewer job openings first, and layoffs only later. Fewer job openings means less competition for workers, and less competition for workers means slow