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The Federal Reserve is weighing what to do about interest rates

A MARTÍNEZ, HOST:

The U.S. economy has been sending mixed signals. Growth is down, but hiring is up. Cars are getting cheaper, but car insurance is more expensive. And even though consumers say they're less confident, they are spending more money. It's a lot for the Federal Reserve to puzzle over today as it weighs interest rates. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: The Fed has promised to be data-driven about when it's safe to start cutting interest rates, but some of the most recent economic data is enough to drive you crazy. Last week's GDP report suggests the economy is slowing down. But the job market shows signs of heating up. Annual inflation is lower than it was a year ago, but higher than it was a month ago. Austan Goolsbee, who heads the Chicago Federal Reserve Bank, says that's why he and his colleagues aren't rushing to make a move on interest rates.

AUSTAN GOOLSBEE: If you want to join the kennel of data dogs, what's a first rule of the kennel? If you are unclear, stop walking and start sniffing. And with these numbers, we need to do more sniffing.

HORSLEY: The Fed's economic bloodhounds have a lot to nuzzle over when they meet today. Late last year, inflation was falling rapidly, and many people thought the Fed would soon be ready to start cutting interest rates. Now that progress on prices seems to have stalled. Fed watchers think the central bank will have to keep rates high at least through the summer to bring inflation under control.

Those high interest rates have thrown a wet blanket on the housing market and cut demand for big-ticket items like cars and furniture. But most people don't worry much about interest rates when they go out to eat at a restaurant or buy a concert ticket. And with Americans devoting more of their spending to those kinds of services now, the Fed's interest rate hammer packs less of a punch. What's more, tens of millions of people have locked in low fixed-rate mortgages and have limited credit card debt. Economist Oren Klachkin of Nationwide says those folks are largely insulated from the Fed's interest rate moves.

OREN KLACHKIN: That's one of the reasons why the consumer remains fairly willing to go out and go to restaurants and go to the mall. They're not feeling that pain of the high rate environment. Of course, that means that inflation has not come down as fast, but that's kind of the trade-off that we're in right now.

HORSLEY: Fed officials say they can afford to be patient in fighting inflation since, so far, higher interest rates have not hurt the job market. Fed Chairman Jerome Powell will likely reiterate that message and his commitment to curbing inflation when he meets with reporters this afternoon.

Scott Horsley, NPR News, Washington.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

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