The Federal Reserve has halted increasing its target interest rate, the Federal Funds Rate, at 5 percent to 5.25 percent, as consumer inflation reported by the U.S. Bureau of Labor Statistics (BLS) continues to slow down, now down to an elevated 4 percent the past 12 months. The prior month, it was 4.9 percent.

The biggest offsets on inflation the past year, which peaked at 9.1 percent annualized in June 2022, have come from energy, which was spiking to the moon in 2022, but is now down 11.7 percent off its 2022 highs. Gasoline prices are down 19.7 percent compared to last year, and fuel oil is down 37 percent.

Still, there are other areas of concern, particularly with food inflation, with prices up 6.7 percent in the past year and still climbing.

So, the Fed is not taking further rate hikes off the table — instead saying in its June 14 statement it is still “determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time…” That means there could still be another spike.

Usually, in the economic cycle, when the Fed reaches a high-water mark for interest rates, it will tend to hold rates at that level until such time that prices have fully corrected, often coinciding with a recession as demand cools off. Many of those signs are already present.

Globally, Germany’s economy is already shrinking, down 0.5 percent and 0.3 percent the past two quarters, which is taking much of the Eurozone with it, after the economy overheated from too much inflation and energy scarcity following Russia’s invasion of Ukraine in February 2022 that worsened an already bad supply-chain situation, particularly of global oil and natural gas markets. And in China, youth unemployment just hit a record high of 20.8 percent in May, as the economy there slows down.

As for the U.S., unemployment is still near record lows, standing at 3.7 percent in May, but that’s up from 3.5 percent in April. And the Fed is projecting the jobless rate to keep rising steadily to 4.1 percent this year and up to 4.5 percent in 2024.

One offset to what might otherwise be a deeper recession are job openings measured by the BLS, which increased by 358,000 to 10.1 million in April. That’s still more than 15.9 percent below the 12 million peak in March 2022. Job openings in the past three recessions have tended to dip significantly.

But the number of job openings increasing over the past decade has coincided with the number of Americans retiring. Americans not in the labor force 65 years old and older has increased by more than 3 million since February 2020 — from 28.3 million to 31.4 million today. In January 2009 that figure was just 20.1 million. That’s the Baby Boomer retirement wave.

Still, a rise to 4.5 percent unemployment over the next year or so is an implied 1.3 million jobs losses between then and now. Not the worst upheaval in labor markets in history —the 2008 and 2009 recession and 2020 COVID recession were much, much worse — but it is still quite significant.

In the current cycle, more than $6 trillion was printed, borrowed, and spent into existence to offset global COVID economic lockdowns and production halts. It was too much money, chasing too few goods. And now comes the price. 

Looking forward, if the unemployment projections play out as anticipated or are worse, there will come a point when the Federal Reserve begins cutting interest rates to ease lending conditions and may begin to accumulate more treasuries and mortgage-backed securities again — so-called quantitative easing — if prices look like they might start contracting outright in deflation. Stay tuned.        

Robert Romano is the VP of public policy at Americans for Limited Government (ALG). The organization says it is a “non-partisan, nationwide network committed to advancing free-market reforms, private property rights, and core American liberties.” 

Nelson Mandela would walk into a room, and it would light up immediately. He had an eye-catching smile and a compelling, captivating personality. He exemplified charisma. In meetings and discussions, he would insist on shaking hands with everyone before starting business.

He was one of the most remarkable figures I met in public life, and I admired Mandela greatly, but he was one of many exceptional leaders that I encountered. A few others come to mind: Pierre Trudeau of Canada; Lee Kuan Yew, known as the founding father of Singapore; and Mikhail Gorbachev, the final leader of the Soviet Union.

Mandela — South Africa’s president from 1994-99 — was a hugely inspirational figure, not only for his personality but also for his life story. In meetings that I attended, he naturally drew everyone’s attention.

The respect and admiration he enjoyed was apparent on his visits to Washington, D.C. In 1990, when Mandela had recently been released from prison, crowds filled the streets as his motorcade drove to the White House. In 1994, President Bill Clinton gave a state dinner in his honor, and an immense crowd of well-wishers assembled on the White House lawn. In 1998, when Mandela received the congressional gold medal, Democrats and Republicans stood and applauded for well over a minute when he walked in.

Mandela and his predecessor as president, F.W. De Klerk, received the 1993 Nobel Peace Prize for their work in dismantling South Africa’s racist policy of apartheid. But for all of Mandela’s accomplishments, one thing that stood out to me was his lack of bitterness after spending 27 years in prison for political activity. To survive that without becoming embittered was truly remarkable.

Canada’s Pierre Trudeau was another charismatic leader. He served as prime minister from 1968-79 and 1980-84, a testament to his skill as a legislator. He was polished, smart, sophisticated, and sure of himself.

Trudeau, who became prime minister in his 40s, brought a sense of youth, energy, and excitement to Canadian politics. He was often compared to the Kennedys. From an American perspective, he may have filled an emotional need for Camelot after the assassinations of John and Robert Kennedy.

His son, Justin Trudeau, became Canada’s prime minister in 2015, at age 43. It’s not often you’ll find a family that’s made that kind of contribution to public life.

Lee Kuan Yew may not be so well known in America, but he should be. He became Singapore’s first prime minister and served for decades. He visited Washington several times; once, I was one of his hosts at the Capitol. A graduate of Cambridge University in England, Lee brought a lot of intellectual firepower to his role. Confident and sometimes blunt, he helped lead a remarkable transformation of his country.

A former British colony, occupied by Japan during World War II and later a part of Malaysia, Singapore didn’t gain independence until 1965. It relied on globalization and free markets to rise rapidly from a backwater to one of Asia’s strongest economies, with one of the world’s highest rates of GDP growth. Lee Kuan Yew played a key role.

When Mikhail Gorbachev died last year, I commented that he had a profound impact on world affairs. His reforms — glasnost, or openness, and perestroika, or restructuring — transformed the Soviet Union and ultimately led to its collapse and the spread of democracy in Eastern Europe.

After he retired, Gorbachev visited Indiana for a lecture and conference, and we went to lunch. People in the café may not have recognized him; but believe me, they knew who he was when he left. He worked the room like an American politician, shaking hands with customers, servers, and even kitchen staff.

Mandela, Trudeau, Lee, and Gorbachev were immensely talented leaders who changed the course of their nations’ histories. They will be long remembered for who they were and what they accomplished.        

Lee Hamilton, 92, is a senior advisor for the Indiana University (IU) Center on Representative Government, distinguished scholar at the IU Hamilton Lugar School of Global and International Studies, and professor of practice at the IU O’Neill School of Public and Environmental Affairs. Hamilton, a Democrat, was a member of the U.S. House of Representatives for 34 years (1965-1999), representing a district in south-central Indiana.