'Risks Are Mounting',' Says NRF Ahead of Expected Interest Rate Hike
“There is a growing list of uncertainties, and the risks are mounting,” said National Retail Federation Chief Economist Jack Kleinhenz Tuesday, ahead of an expected Wednesday interest rate hike by the Federal Reserve. “The economy’s fast-paced growth could slow somewhat…
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as the Federal Reserve tries to bring inflation under control in the next few months, but consumers are likely to keep on shopping as lower inflation eases uncertainty,” Kleinhenz said. Underlying strength and momentum from the consumer and business sectors “are likely to offset a modest slowdown,” Kleinhenz said. The Fed’s actions could mean higher car and mortgage payments, but Kleinhenz noted household finances “have remained strong” despite consumers’ worries over inflation and war in Ukraine. March retail sales were up 4% year on year, showing consumers have “the willingness and ability to spend” as a result of job growth, wage gains and wealth gains accumulated during the COVID-19 pandemic, plus low financial obligations relative to income, he said. “The Fed is facing a tough problem,” Kleinhenz said: “Its playbook for tightening of monetary policy can exert pressure on demand,” he said, but it doesn’t have the direct ability to influence the supply side by “producing more gas, planting fields of needed crops or manufacturing microchips.” NRF held to its 2022 forecast of 6%-8% retail sales growth to $4.86 trillion-$4.95 trillion.